Page 259 - (DK) The Business Book

SUCCESSFUL SELLING 257

See also: Managing risk 40–41 ■ Take the second step 43 ■ How fast to grow Is Ansoff’s matrix
44–45 ■ Protect the core business 170–71 ■ The MABA matrix 192–93
still relevant?

Igor Ansoff (1918–2002) is
Increasing risk
remembered as the father of
EXISTING NEW modern marketing strategy.
PRODUCTS PRODUCTS His matrix has generated many
Ansoff’s matrix is variations over the decades
expressed as a square and became one of the
divided into four equal foundation stones of business
cells, each of which EXISTING MARKETS Market Product strategy, underpinning ideas
represents different penetration development such as core competence and
marketing strategies, competitive strategy.
with different In the 1970s Ansoff
combinations of Increasing risk recognized the problem of
product status and “paralysis by analysis”—the
market conditions.
Market penetration is overthinking of a problem and
clearly the least risky, Market subsequent failure to act. He
while the quadrant of NEW MARKETS development Diversification advocated a more flexible
diversification presents approach, based on local
the highest risk. conditions and a company’s
individual cirumstances.
Ansoff’s matrix has
limitations. Because it focuses
on market potential and
strategies for growth, it is not
greater sales might be achieved markets. This strategy reduces risk able to support other factors
through competitive pricing, in the long term by alleviating a and scenarios, such as the
advertising, loyalty programs, or company’s reliance on core products. resources available, or if a
by driving out competitors. However, a company can risk a great company’s priority is survival
“Market development” entails deal, depending on the initial rather than growth. However,
selling the same product in different outlay, and needs to have plenty of used with other marketing
markets. Additional spending may resources if the strategy fails. tools, it remains valuable and is
be unnecessary unless localization still used to gauge actual and
is required, but the cost of setting A risky venture expected growth.
up distribution channels in the new UK supermarket Tesco’s venture
market poses some risk. In this into the US shows the risks of
model, different geographic or diversification. After 10 years’
demographic markets, or alternative preparation, it launched its Fresh &
sales channels—such as online or Easy stores in 2007, but misread the
direct—might be tapped. market. Positioning itself in the
“Product development” strategy middle, it was neither upscale nor
is the sale of new or significantly discount, with most of its outlets in As companies became
improved products to an existing working-class suburbs where increasingly skillful strategy
market. Here, the cost of product consumers looked for bargains. formulators, the translation of
development, associated Critically, Tesco’s small-scale, strategy into results ... created
distribution, and marketing support walk-in stores did not suit the paralysis by analysis.
poses a risk. Companies adopting average car-dependent US shopper. Igor Ansoff
this strategy might offer variants of The investment did not pay off,
the product, or develop related goods. costing Tesco over $1.9 (£1.2)
The final, and riskiest strategy, is billion. The outcome may not have
that of “diversification”—moving into been forecast by Ansoff’s matrix, but
new product areas and new the risk would have been clear. ■