Ansoff Matrix - Tool for Analyzing Growth Strategy

The Ansoff Matrix was first published in the Harvard Business Review in 1957, and has strategic planning tool for a quick and simple way to develop a strategic approach to growth.

Ansoff Matrix is also known as Product/Market Expansion Grid, as it shows four growth options for business formed by matching up existing and new products and services with existing and new markets.

The Matrix essentially shows the risk that a particular strategy will expose you to, the idea being that each time you move into a new quadrant (horizontally or vertically) you increase risk (See Figure 1).

Market Development Quadrant

Here, you’re targeting new markets, or new areas of the market. You’re trying to sell more of the same things to different people. Below are the possible actions:

- Target different geographical markets at home or abroad
- Use different sales channels, such as online or direct sales if you are currently selling through the trade
- Target different groups of people, perhaps different age groups, genders or demographic profiles from your normal customers.

Diversification Quadrant

This strategy is risky: There’s often little scope for using existing expertise or achieving economies of scale, because you are trying to sell completely different products or services to different customers

Its main advantage is that, should one business suffer from adverse circumstances, the other is unlikely to be affected.

Market Penetration Quadrant

With this approach, you’re trying to sell more of the same things to the same people. Below are possible actions:

- Advertise, to encourage more people within your existing market to choose your product, or to use more of it.
- Introduce a loyalty scheme.
- Launch price or other special offer promotions.
- Increase your sales force activities, or
- Buy a competitor company (particularly in mature markets)

Product Development Quadrant

Here, you’re selling more things to the same people. Below are possible actions:

- Extend your product by producing different variants, or packaging existing products it in new ways.
- Develop related products or services.
- In a service industry, increase your time to market, customer service levels, or quality.


Application of the Ansoff Matrix

Corporate Ansoff Matrix

Viewing from a business perspective, staying with existing product in your existing market is a low risk option: You know the product works, and the market still accepts the product.

However, you expose yourself to a whole new level of risk either moving into a new market with an existing product, or developing a new product for an existing market. The market may turn out to have radically different needs and dynamics than you thought, or the new product may just not work or sell.

And by moving two quadrants and targeting a new market with a new product, you increase your risk to yet another level.

Personal Ansoff

Looking at it from a personal perspective, just staying where you are is a low risk option.

Switching to a new role in the same company, or changing to a similar job with a company in the same industry is a higher risk option. And switching to a new role in a new industry has an even higher level of risk.(See Figure 2)

Manage risk appropriately and if you're switching from one quadrant to another, prepare and practice the following: -

- Research/study the move carefully;
- Has built the capabilities needed to succeed in the new quadrant;
- Have sufficient resources to cover transition period while you're developing and learning how to sell the new product, or are learning what makes the new market tick; and
- Have firstly thought through what you have to do if things don't work out, and that failure won't "break" you.

Boston Matrix and Investment Strategy

The Boston Matrix was developed in the 1970s by The Boston Consulting Group as a way of helping companies to decide on an appropriate investment strategy for their future.

The diagram shows how different products or parts of a company can be compared in terms of market growth and market share.

Cash Cow Section (High Market Share but Low Growth)
If a product or business unit is a cash cow then it has a large share of a market that is no longer growing. It produces a lot of revenue but most of this can be invested in other areas of the company as further investment in the cash cow would produce little or no extra profit.

Star Section (High Market Share and High Growth)
A star also has a large share of the market but, unlike the cash cow, it is growing quickly. In order to grow further, it requires more investment which it is often able to pay for from its own profits. When it stops growing, a star may become a cash cow.

Problem Child Section (Low Market Share but High Growth)
A problem child or question mark has a small share of a growing market; it needs considerable investment if it is to grow.

Dog Section (Low Market Share and Low Growth)
A dog has a small share of a market that is not growing. A dog is of little value to most companies and a decision must be taken whether to continue investing in it.

Understanding the Market Share and Relation to Market Growth Using Boston Matrix

Market share is the percentage of the total market that is being serviced by company, measured either in revenue unit volume terms. The higher your market share, the higher proportion of the market you control.

The Boston Matrix assumes that if you enjoy a high market share you will normally be making money (this assumption is based on the idea that you will have been in the market long enough to have learned how to be profitable, and will be enjoying scale economies that give you an advantage).

The question of whether the company need to use the available resources to invest in the profitable product is highly depends on the product life cycle stage, competition and forces of environment.

This is where market growth comes into play. Market growth is used as a measure of a market's attractiveness. Markets experiencing high growth are ones where the total market is expanding, which should provide the opportunity for businesses to make more money, even if their market share remains stable.

By contrast, competition in low growth markets is often bitter, and while you might have high market share now, what will the situation look like in a few months or a few years? This makes low growth markets less attractive.

Styles of Influencing Others

Influencing is a powerful tools that manager use in managing organization. Some of the way in which manager behave and the approach manager takes will have a marked effect on your ultimate success or failure.

Having a range of approaches and styles of behaviour gives you more flexibility. It increases your options - and your chances of success.

Natural Styles

Most managers have a natural style of influence which they prefer to use whenever possible. More flexible managers also keep in reserve a fall back style, used when the preferred style doesn't achieve the desired results.

However, there are at least eight identifiable styles of influence - not including aggression, manipulation or force.

Because you are influencing a wide range of people, proficiency in a wider range of styles will ensure more success. Step outside the comfort zone of your natural style and enjoy greater success by practising new ways of influencing.

However, do think carefully which influencing style has the greatest chance of succeeding. Varying your styles too much may give you a reputation for being unpredictable.

The Autocratic Approach

This approach works best when supported by power, authority, age, knowledge or wisdom. Resistance or objections are minimised. You tell others what you want them to do and they do it.

The Collaborative Approach

This approach works successfully without you having any power or authority.Include others in the decision-making process.

A word of caution, democracy takes time and can result in watered down solutions. Remain consistently collaborative. Don't give up too early. Avoid imposing too many parameters or conditions - these will create frustration in others.


The Logical Approach

You use clear logical, unassailable arguments, supported by proof.

This approach works best when the other person is a logical, linear thinker. Avoid exaggeration and unnecessary emotion. Offer instead facts and figures.

The Emotional Approach

You use your natural charm, charisma or enthusiasm.

This approach works when your influence becomes a genuine extension of your own feelings and beliefs. Appealing to the long-term effects of your ideas, you will reinforce their continuing value.

The Assertive Approach

You ask directly, clearly and confidently for what you want, or don't want.

Assertiveness can have a lasting effect, especially on those who least expect it from you. Any resistance is met by your persistence. Assertive influence carries little or no risk.

The Passive Approach

You win the day by being submissive, by not overtly influencing.

As you quietly demonstrate desired behaviours, others can see for themselves the value in following your lead. Many potential confrontations with power or authority demand submissive influence, which can pay positive dividends.

The Sales Approach

You use good old-fashioned salesmanship.

Draw out their point of view, understand their needs, demonstrate that you empathise; minimise resistance by showing how their ideas dovetail with your own; show how they will benefit.

The Bargaining Approach

You trade concessions in order to reach a mutually acceptable conclusion.

Don't just share the cake - make it a bigger one. Your success as a fair negotiator will help cement the relationship.

Aim too low and you'll end up even lower. Over collaborate and you may regret giving too much away. Always trade concessions.

Qualities of A Good Salesman

A good salesman should have the following qualities in order to achieve sales target and objectives.

A. Professional Qualities

Training and experience

A good salesman should be expert in his respective field. He should have knowledge about the technique of production and art of salesmanship. He must be trained in speaking regional and other languages. It is advisable for the successful result of the operation that a salesman must undergo on practical training before coming to the actual job.

B. Specific Qualities

Latest Information

A salesman must have up-to-date information in regarded to quality, nature, description, prices and importance of the dealing products. He should also have the knowledge of potential market, organization of his firm and taste of his consumers.

C. General Qualities

Psychological approach

A salesman should be in a position to follow the psychology of human nature. He must have ability of understand his customer's choice. So he should talk in terms of the customer's interest and he must create pleasant atmosphere to achieve favorable attention and interest on the part of the prospect buyer.

Convincing style

A good salesman should adopt convincing style in order to win prospect's confidence. He must persuade his prospect that the specific product being sold will best fill that need.

Sound appearance

A salesman should have the personality of good health and sound physique. He must be stalwart young man with pleasing manners and nice habits. He must possess the abilities of influencing and attracting other persons.

Honesty

It is a prominent quality of a good salesman. .In order to establish the goodwill of firm he must be honest and sincere in performing his duty. There is no place for dishonest salesman in any business.

Steady work

It is the most important trait of successful salesman that he should be industrious. He must show enthusiasm for his profession and constantly work hard to achieve more success in his field.

Courtesy

A salesman must be very polite. Courtesy in to business what oil is to machinery. It costs nothing but wins a reputation. So polite language should be used for the object of winning buyer's confidence. This will also help him to make regular and permanent customers. In addition to the foregoing qualities, a salesman should be sincere, self reliant, sociable, and tactful and diplomatic.

Sociability

A good salesman must keep in touch with the people of different nature in the world and not keep himself to himself. He should move about with a view to widen his range of acquaintances. Salesman should therefore, possess a quality of mixing freely with unknown person within a short time. He should be sociable and popular in order to win new friends.

Self Reliance and persistence

Another notable quality of the goods salesman is ability to convince the prospective customers with persistent efforts. In order to adequately satisfy customers demand he must be a man of self reliance. He should have perseverance and determination.

Dependability

The successful salesman should have the capacity of dependability. It keeps him much to win the heart of both customer and employer. A dependable salesman will remain loyal to firm. Thus he will be sincere in his approach to customer with a view to increase the volume of sales and enhances the firm’s reputation.

Others
Tolerate by Nature
Organized
Flexible
Enthusiasm