The Ansoff matrix is also known as the product/market matrix, and basically serves to analyze the strategic possibilities we have in our business when it comes to growth.

The creator of this matrix was Igor Ansoff, a Russian mathematician and economist who has been labeled a father of strategic management.

He believed that the growth of a company involved working on two concepts: market and product; and two states: new (just emerging) and current (long-standing). For these combinations of possibilities, he devised four basic strategies.

Ansoff matrix:

MARKET PENETRATION

Market penetration occurs when we are faced with an existing market plus an existing product, i.e. neither the market nor the product is new.

This type of strategy is the least risky. We are talking about selling a product that we are already familiar with in a market that is also familiar to us.

What this strategy seeks to achieve is:

• Increased sales to our regular customers through offers, promotions or advertising activities.
• Attraction of customers from competitors.
• Capture of current non-consumers. That is, people who are not our customers or those of our competitors, but who could become customers.
• Attract new customers in the same segment by increasing our marketing.
• Innovations.

DEVELOPMENT OF NEW MARKETS

When we target a combination of a new market and an existing (current) product.

The basic idea of this strategy is to see if we can sell our products in markets other than the one we are currently selling in. These new (to us) markets can be found in different ways:

• Looking for different geographic markets: start selling your product outside the geographic area you use now. Maybe in other countries, maybe in other neighborhoods... it depends on your type of business.
• Looking for specific niches: maybe your product can be sold to a different type of prototypical customer than the one you have now. If you sell shoes for runners, maybe you can try to sell them to normal people who are simply looking for comfortable shoes.
• Looking for new distribution channels: if you used to sell in store, maybe now you should sell online. Or the other way around.

The risk of this strategy is that you don't know how the new audience will react to the product you already sell.

NEW PRODUCT DEVELOPMENT

The idea of this strategy is to create new products to sell in existing markets. In other words, try to sell something new to your regular customers. To create a product new, you have several options:

• Create a truly new product that meets the needs of your regular customers.
• Create new ranges of the product you usually sell. In this way, according to the quality of each range, you will serve different sectors of your clientele.
• Create different versions of products you currently sell: smaller, bigger, lighter, in other colors...

In this type of strategy, you face the challenge that you don't know how your regular customers will react to the new products.

DIVERSIFICATION

In this scenario we are talking about a new product for a new market. It is the riskiest strategy because the product and the market are both unknown to you.

In this context, we have two diversification possibilities:

UNRELATED DIVERSIFICATION

In this case, we are talking about creating a product outside our resources and capabilities, as it is not in line with other products we currently sell. Continuing with the Apple example, when Apple decided to sell cases for its phones, it fell into this group of unrelated diversification, as Apple created a new product for which it had no previous experience or infrastructure.

RELATED DIVERSIFICATION

It is one that involves resources and capabilities that you currently use in your business. For example, Apple leveraged the knowledge and skills acquired with its iPhone product to create the iPad. The tablet is a new product, but it did not force Apple to acquire new skills or knowledge; rather, it was a product that was already in sync with other products from the Californian company.

This diversification, in turn, is divided into three others:

1. Vertical forward integration

The company tries to become more competitive by acquiring or creating subsidiaries that distribute or sell its product.

For example, Apple stores can be found in many cities around the world. They sell Apple products without an intermediary and thus improve the profit margin.

2. Vertical Backward Integration

The company tries to become more competitive by taking over/acquiring stages of the value chain of its product. For example, this would happen if you eliminate (or buy) one of your suppliers to create yourself one of the components/materials they provided you with.

For example, when Apple decided to stop ordering the screens for its iPhones and iPads from Samsung and start creating them themselves (reaching an agreement with a third company with experience in these matters).

3. Compensated vertical integration

It is a merger of the previous two. The company acquires other companies that not only produce materials of our product but also sell it.

CONCLUSIONS

This matrix is a simple way of approaching growth strategies. Perhaps too simple. It is an old matrix and it does not take into account important factors (such as the competence), but, even with those defects, it is still a logical and structured way to analyze what growth options we have. Therefore, I recommend that you try to transfer what is written in this article to your business, and you will see that you may find new ways to grow that you had not taken into account.