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Ansoff's Matrix & Porter's Strategies

Ansoff's Matrix outlines four strategic options for growth: market penetration, market development, product development, and diversification. Market penetration involves marketing existing products to existing customers. Market development means marketing existing products to new customers. Product development introduces new products to existing customers. Diversification involves marketing new products to new customers. Porter's Generic Competitive Strategies are cost leadership, differentiation, and focus. Cost leadership aims for the lowest costs. Differentiation targets unique attributes valued by customers. Focus narrows the scope within an industry by targeting specific customer segments. The focus strategy has cost focus and differentiation focus variants.

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71 views3 pages

Ansoff's Matrix & Porter's Strategies

Ansoff's Matrix outlines four strategic options for growth: market penetration, market development, product development, and diversification. Market penetration involves marketing existing products to existing customers. Market development means marketing existing products to new customers. Product development introduces new products to existing customers. Diversification involves marketing new products to new customers. Porter's Generic Competitive Strategies are cost leadership, differentiation, and focus. Cost leadership aims for the lowest costs. Differentiation targets unique attributes valued by customers. Focus narrows the scope within an industry by targeting specific customer segments. The focus strategy has cost focus and differentiation focus variants.

Uploaded by

shruti.shinde
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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STRATEGIC PLANNING

Ansoff's Matrix - Planning for Growth

This well known marketing tool was first published in the Harvard Business Review (1957) in an article
called ‘Strategies for Diversification’. It is used by marketers who have objectives for growth. Ansoff’s
matrix offers strategic choices to achieve the objectives. There are four main categories for selection.

Market Penetration

Here we market our existing products to our existing customers. This means increasing our revenue by,
for example, promoting the product, repositioning the brand, and so on. However, the product is not
altered and we do not seek any new customers.

Market Development

Here we market our existing product range in a new market. This means that the product remains the
same, but it is marketed to a new audience. Exporting the product, or marketing it in a new region, are
examples of market development.

Product Development

This is a new product to be marketed to our existing customers. Here we develop and innovate new
product offerings to replace existing ones. Such products are then marketed to our existing customers.
This often happens with the auto markets where existing models are updated or replaced and then
marketed to existing customers.
Diversification

This is where we market completely new products to new customers. There are two types of
diversification, namely related and unrelated diversification. Related diversification means that we remain
in a market or industry with which we are familiar. For example, a soup manufacturer diversifies into cake
manufacture (i.e. the food industry). Unrelated diversification is where we have no previous industry nor
market experience. For example a soup manufacturer invests in the rail business.

Porter's Generic Competitive Strategies

A firm's relative position within its industry determines whether a firm's profitability is above or below the
industry average. The fundamental basis of above average profitability in the long run is sustainable
competitive advantage. There are two basic types of competitive advantage a firm can possess: low cost
or differentiation. The two basic types of competitive advantage combined with the scope of activities for
which a firm seeks to achieve them, lead to three generic strategies for achieving above average
performance in an industry: cost leadership, differentiation, and focus. The focus strategy has two
variants, cost focus and differentiation focus.

1. Cost Leadership

In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost
advantage are varied and depend on the structure of the industry. They may include the pursuit of
economies of scale, proprietary technology, preferential access to raw materials and other factors. A low
cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain overall
cost leadership, then it will be an above average performer in its industry, provided it can command prices
at or near the industry average.

2. Differentiation

In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are
widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as
important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a
premium price.

3. Focus

The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The
focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to
the exclusion of others.
The focus strategy has two variants.
(a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a
firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences
between a focuser's target segment and other segments in the industry. The target segments must either
have buyers with unusual needs or else the production and delivery system that best serves the target
segment must differ from that of other industry segments. Cost focus exploits differences in cost behavior
in some segments, while differentiation focus exploits the special needs of buyers in certain segments.

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