A scientific approach to business growth – the Ansoff Matrix.

Using Ansoff’s Matrix to help develop your business

Ok, so you want to improve and expand your business. How do you do it? Well, in basic terms there are only 4 ways you can grow a business. They are:

  • Developing a new product or service;
  • Expanding your market area;
  • Diversifying your offering, and
  • Increasing penetration into your existing market.

These fundamentals were laid out by a management teacher called Igor Ansoff and they act as a very good way of corralling your thoughts when looking at how you run and expand your business. Put into a grid the idea looks like the one shown below.

 

 

Let’s take an example; at the moment you sell bikes and bike parts. As you only have a single shop you only sell to local customers. Taking the 4 quadrants we can now easily understand what the options open to us are.

Market penetration

Taking the same bike parts and selling to the same market. Options are pretty limited here but we could expand our market share by doing more advertising, having a sale or sponsoring a local event to get more people taking up cycling and then, hopefully, buying from us.

Product development

Here we could start offering new choice to our present customers. If we’ve only sold bikes to date then how about cycle clothing? Or we could develop a set of accessories for bikes – or even design and build new bikes ourselves.

Market development

Here we’re taking our existing product to new markets. The obvious one here is selling on the Internet. Alternatively, we could look at opening up new bikes stores in local towns to help spread our market area.

Diversification

This is the big one. Taken to extremes this is like starting a new business. For our bike business this might mean selling disabled scooters – a whole new idea in a market that probably hasn’t bought from us before.

Risk

It has probably dawned on you by now that some of these changes are more risky (and costly to implement) than others. That’s not to say they should be avoided but perhaps approached with a little more care and attention to detail. There’s a big difference between buying in some clothing to expand your offering and trying to penetrate the electric wheelchair market.

If you’re going to run a business successfully you need to have structure in your thoughts and the way that you improve and develop the business. The Ansoff matrix is a great way to help manage your creative ideas while you consider the way ahead.

 

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