A Business Strategic Planning Tool- The Ansoff Matrix

The Ansoff Matrix was developed by H. Igor Ansoff and first published in the Harvard Business Review in 1957, in an article titled “Strategies For Diversification.” It has given generations of business leaders a quick and simple way to think about the risks of growth. Sometimes called the Product/Market Expansion Grid, the Matrix shows four strategies you can use to grow. It also helps you analyze the risks associated with each one. The idea is that each time you move into a new quadrant (horizontally or vertically), risk increases.

1. Market Penetration: in the lower left quadrant, is the safest of the four options. Here, you focus on expanding sales of your existing product in your existing market: you know the product works, and the market holds few surprises for you.

2. Product Development: in the lower right quadrant, is slightly more risky, because you’re introducing a new product into your existing market.

3. Market Development, in the upper left quadrant, you’re putting an existing product into an entirely new market. You can do this by finding a new use for the product, or by adding new features or benefits to it.

4. Diversification: in the upper right quadrant, is the riskiest of the four options, because you’re introducing a new, unproven product into an entirely new market that you may not fully understand.

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