Making one's business successful is an excellent feat. However, keeping it on top while expanding the market reach requires much effort. Sometimes, business owners can be complacent once their company is on top. The Ansoff Matrix will be a valuable tool for exploring various options for growing your business. Read through this article to know more.
What is an Ansoff Matrix?
An Ansoff Matrix is a strategic tool allowing companies to evaluate various business growth options. The name came from the matrix's creator Igor Ansoff which he introduced in 1957. As you use the Ansoff Matrix template, your team can identify the potential risks of every component and device-specific initiative which fit your organization.
The matrix comes with four different strategies placed in each quadrant. Technically, you'll have four squares which you must fill in. These strategies are the following:
- Market penetration. This strategy is adopted when an existing product with an identified market needs a growth strategy, for example, in the telecommunications industry. You can expect millions of products released in the industry resulting in much tougher competition. The company must create initiatives to increase its market share for the product to grow.
- Market development. You use the second quadrant of the Ansoff Matrix template when targeting new markets with existing products. An example is famous shoe brands that continue to expand to other markets with their various shoe collections.
- Product development. As the name suggests, this quadrant in the template refers to a company with an excellent market share in an existing market. As a result, they might need to create new products for expansion.
- This applies to entirely new products introduced to a new market. An example would be a trading company that plans to expand in insurance, retail, securities, and electronics.
When to use the Ansoff Matrix?
Companies can use the Ansoff Matrix when they do strategic planning. It's used to assess the specific relative attractiveness of the company's growth strategies which can leverage existing markets and products against newer ones. Companies will also have an overview of the risk levels associated with each component. In most cases, businesses develop an Ansoff Matrix template once a year. However, some also do it frequently amid the fast-changing conditions in the industry.
Benefits of the Ansoff Matrix
Surely, the Ansoff Matrix benefits various companies to grow their business. Some of the tool's advantages include the following:
- The Ansoff Matrix template is easy to understand. Anyone with only a little marketing knowledge can create the matrix efficiently. Complex calculations and situations are not involved.
- Provides focus on all potential alternatives. The matrix allows companies to examine the possible options in making the right decisions which eventually help the business increase sales and profits. Companies can use the market development quadrant of the matrix if a product is not doing well in the market. They must allocate a budget for advertising and marketing to introduce the current product in new markets.
- Opportunities for short-term and long-term growth strategies. The matrix is also versatile enough to accommodate short-term and long-term planning initiatives. For example, if a company wants to enter a new market, it can use the market penetration using the Ansoff Matrix template.
- Risk analysis. Besides the initiatives you input on the template, Ansoff Matrix lets you analyze possible risks for every strategy. For example, a telecommunications company in the US plans to expand to other continents. In that case, it can adopt the diversification section to introduce low-cost products to relatively low-income markets.
How to use an Ansoff Matrix?
Each company has specific ways to maximize Ansoff Matrix. The following points might be helpful when you use the framework within your organization.
- Create the matrix. Most companies use an Ansoff Matrix template online to save time and energy. Design the grid the way you want it. Diagramming software offers several tools to customize the template's colors, design, and overall layout.
- Analyze the options. Fill in the template with potential strategies your company can adopt. They must be practical ways you can implement to grow the business from every angle. At the same time, avoid limiting your options. You can think bigger and bolder.
- Conduct a risk assessment. Understanding specific risks is the primary point of the Ansoff Matrix. Ensure to identify the potential challenges involved.
- Plan for the potential risks. It pays to create a contingency plan to address the risks. You should focus on the high-probability risk before addressing the others.
- Choose your approach. During this stage, you'll eventually know the best growth strategy to pursue. Take such direction and plan its implementation.
How to make an Ansoff Matrix in Boardmix?
- Ensure you are logged in to your Boardmix account. Click on the 'Workspace' tab.
- Go to the 'Templates' section and search Ansoff Matrix.
- Hover your cursor to the matrix thumbnail and click 'use' to launch the template.
- Go to the 'Work here' column and fill in the quadrants of the matrix. You can edit the colors of each section and add photos or stickers if you need to.
- Share the template with your team by providing the link to the project.
FAQs about the Ansoff Matrix
What are the key elements of the Ansoff Matrix?
There are four critical elements of the Ansoff Matrix, including market penetration, market development, product development, and diversification.
What are the drawbacks of the Ansoff Matrix?
There are three significant drawbacks that you must look into when using the Ansoff Matrix template.
- It lacks a cost-benefit analysis. Generally, the matrix does not focus on cost-benefit research. This means additional time and effort must be allocated to weigh the costs and benefits of each option before making the final decision. Such analysis is necessary to determine the success of the strategies.
- The matrix does not focus on competitors. As you know, the framework keeps tabs on the product and market strategies. As a result, ignoring the impact of competitors on such a strategy. In any industry, competition is critical, and without a thorough examination, it may jeopardize the company's success.
- It can be challenging to predict. Since you can not 100% predict market and consumer reactions, it can be challenging to foresee the impact of the matrix in terms of sales and profits.