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diff --git a/content/blog/2019-12-03-the-ansoff-matrix.org b/content/blog/2019-12-03-the-ansoff-matrix.org deleted file mode 100644 index 1bee6a8..0000000 --- a/content/blog/2019-12-03-the-ansoff-matrix.org +++ /dev/null @@ -1,105 +0,0 @@ -#+title: The Ansoff Matrix -#+date: 2019-12-03 -#+description: Learn about the Ansoff Matrix, a strategic management tool. -#+filetags: :business: - -* Overview -As the world of business evolves, managers must approach business planning and -strategy with a contemporary mindset. According to Dess, McNamara, Eisner, and -Lee, managers must be willing to adapt to the modern business environment by -going beyond "'incremental management', whereby they view their job as making a -series of small, minor changes to improve the efficiency of the firm's -operations"(2019). - -One reason that strategic management is crucial is because most businesses that -fail in the United States each year fail due to a lack of strategic focus or -direction(2019). The rate of failure for businesses with poor strategies shows -that strategic planning and management are crucial to a business's strength and -longevity, injecting the critical factors of growth and direction into a -company's business plan. - -One of the most significant strategic planning and management frameworks that -companies can use is the [[https://en.wikipedia.org/wiki/Ansoff_matrix][Ansoff Matrix]]. While this framework has unique purposes -and use-cases, it can effectively help an organization grow and compete. -Specifically, the Ansoff matrix is one of the most effective frameworks for -companies who want to focus on increasing sales revenue or profitability(2019). - -This framework uses a two-by-two figure to show the four strategic options for -companies to use in this framework: market penetration, market development, -product development, and diversification (see *Figure 1*). The x-axis of the -matrix focuses on the firm's markets and also determines if the firm is looking -to enter new markets or innovate in its current markets. The y-axis of the -matrix focuses on the firm's products and determines if the firm wants to pursue -strategies around their existing products or explore new products. - -#+caption: The Ansoff Matrix by JaisonAbeySabu, Own work, CC BY-SA 3.0 -[[https://img.cleberg.net/blog/20191203-the-ansoff-matrix/ansoff_matrix-min.png]] - -* Strategic Options -** Market Penetration -The most straightforward strategy in the Ansoff matrix is to focus on existing -products in existing markets, also known as market penetration(2019). Companies -such as Coca-Cola have used market penetration successfully by investing a lot -of money to get further value out of their current markets. Coca-Cola does this -by introducing new features such as Christmas-themed bottles, personal names on -the bottles, and other marketing schemes. - -** Market Development -Market development extends existing products into new markets in an attempt to -increase the number of buyers. One interesting way that Coca-Cola used this -strategy comes from the stigma that Diet Coke is a woman's drink(2019). -Coca-Cola introduced Coca-Cola Zero, which contained the same nutritional -content as Diet Coke, but was packaged in a dark black can to appear more -"manly"(2019). - -** Product Development -Product development uses existing markets to introduce new products so that the -firm can better meet customer needs(2019). The extreme end of diversification is -home to companies such as Johnson & Johnson, a healthcare company that has -developed a business portfolio of more than 60,000 different products(2019). -Johnson & Johnson's dedication to continuous diversification has led them to a -balance sheet rating of "AAA", industry recognition for diversification, and -increases in their investor dividends for 57 consecutive years(2019). - -** Related Diversification -Diversification, the final strategy of the Ansoff Matrix, is more difficult than -the others since it involves exploring both new markets and new products. -Related diversification is a diversification strategy that closely relates to -the firm's core business. Coca-Cola's best example of related diversification is -its acquisition of Glaceau and Vitamin Water, which expanded their drinking -lines of business(2019). - -** Unrelated Diversification -Unrelated diversification is a diversification strategy that does not really -relate to the firm's core business but still diversifies their business -portfolio. A good example of this would be a coffee company who has decided to -enter the market for bicycle sales. The main purpose of this strategy is to an -extremely diverse company that will not go bankrupt if one market goes through -difficult times. However, this requires a lot of independent skills and heavy -investments since the company most likely cannot easily transfer knowledge -between the markets they compete in. - -* Requirements for Success -To use the Ansoff Matrix framework, managers need to formulate corporate goals -and objectives. Without goals and direction, management frameworks do not -present much practical utility. Further, the Ansoff Matrix requires the managers -involved to make tactical decisions and create a path for the company to take -toward their goals. Lastly, both the Ansoff Matrix needs to consider both -internal and external perspectives throughout the strategy formulation process. - -One interesting probability is that companies will be using multiple strategic -planning and management frameworks at the same time. While this may sound like -it could crowd the management process, there are numerous reasons to do so. For -example, the Ansoff Matrix and the Balanced Scorecard are relatively popular, -and they cover entirely different parts of a company's strategy. Using the -results from the Balanced Scorecard could inform a company of the potential -product and market demands, such as from customer or supplier survey results, to -help the company determine which Ansoff Matrix strategy to pursue. However, a -combined approach at this level would require mature frameworks and focused -managers who are able to strategize at a high level. - -Lastly, it should be noted that the author of the Ansoff matrix, Igor Ansoff, -often used the term [[https://en.wikipedia.org/wiki/Analysis_paralysis][paralysis by analysis]] to explain the mistake of companies -who overuse analysis and spend too much time planning. Companies need to -understand the utility of a strategic management framework while ensuring that -the company is poised to execute as efficiently as they have planned. |