CIMA P3 Syllabus B. Strategic risk - Growth vector matrix (Ansoff) - Notes ^{10 / 13}

So to grow, the company must:

1. sell more in its existing markets (try to make its existing markets bigger)

2. sell new products in its existing markets

3. sell existing products in new markets or new market segments (for example in other countries)

4. sell new products in new markets

These are strategic directions that Ansoff described in his growth sector matrix above

• .

  1. Market Penetration

     A sensible choice in a growing market. This would mean a bigger potential demand as time goes by.

     Equally, not so good in a declining / mature market 

     How to do it

     • Persuade existing customers to buy more, through more use and marketing

     • Persuade customers who have not bought your product before to buy it now. 

       Maybe by advertising or special promotional offers.

     • Persuade customers to switch from competitors. 

       (notice how 1 and 2 increase total demand whereas 3 just takes a bigger share)

  2. Market Development

     How to do it

     • Start selling in new geographical markets (through regional, national or international expansion).

     • Offer slightly differentiated versions of existing products, or by making them available through different distribution channels.

  3. Product Development

     Why choose this strategy?

     • You have a strong brand and can extend the goodwill to new products.

     • You have a strong research and development department or a strong product design team.

     • To respond to a new product by a major competitor

     • To respond to changing customer needs / tastes or just making use of new technologies now available

  4. Diversification

     • Concentric diversification

       (also called related or horizontal diversification), means that the new product-market area is related in some way to the entity’s existing products and markets

     • Conglomerate diversification

       which means that the new product-market area is not related in any way to the entity’s existing products and markets.

       These could both be achieved by (most likely) acquiring existing companies abroad or at least entering into JVs and franchises etc or it could also be done by simple organic growth - though this would be far harder and slower (though the returns may be greater)