From 74992aaa27eb384128924c4a3b93052961a3eaab Mon Sep 17 00:00:00 2001 From: Christian Cleberg Date: Sat, 27 Apr 2024 17:01:13 -0500 Subject: test conversion back to markdown --- content/blog/2019-12-03-the-ansoff-matrix.md | 128 +++++++++++++++++++++++++++ 1 file changed, 128 insertions(+) create mode 100644 content/blog/2019-12-03-the-ansoff-matrix.md (limited to 'content/blog/2019-12-03-the-ansoff-matrix.md') diff --git a/content/blog/2019-12-03-the-ansoff-matrix.md b/content/blog/2019-12-03-the-ansoff-matrix.md new file mode 100644 index 0000000..da3fa11 --- /dev/null +++ b/content/blog/2019-12-03-the-ansoff-matrix.md @@ -0,0 +1,128 @@ ++++ +date = 2019-12-03 +title = "The Ansoff Matrix" +description = "" +draft = false ++++ + +# 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 [Ansoff +Matrix](https://en.wikipedia.org/wiki/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. + +![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 [paralysis by +analysis](https://en.wikipedia.org/wiki/Analysis_paralysis) 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. -- cgit v1.2.3-70-g09d2