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What is the Ansoff Matrix?

The Ansoff Matrix - also called Product Market Matrix - is a tool for strategic management. It analyzes and differentiates between various growth potentials based on the product portfolio of a company and the external market. In this way, four growth potentials can be presented which can be aimed at one after the other.

  1. Market penetration: Old product - Old market
    The increase of the own market share for an existing product on an already developed market is considered. This stage is the first level of growth that a company can achieve.

  2. Market development: Old product - new market
    In this second growth phase, a new market will be opened up, which will be served by the existing product. The aim here is to identify an additional benefit for a new customer group for the existing product.

  3. Product development: New product - old market
    If the existing product is already being used for a variety of markets and applications, the development of new products offers significant potential. The knowledge of the market that has already been acquired plays a fundamental role in the success of the new product. The old activities have already made it clear how the customer segments can best be addressed and which needs need to be satisfied first and foremost.

  4. Diversification: New Product - New Market
    Last but not least, diversification, i.e. the development of new products for a completely new market, offers the last stage of growth according to Ansoff. However, this stage should only be reached if a company is already a professional in terms of product development and market analysis, as diversification of the company offers an elementary safety net through risk diversification, but also represents a high degree of uncertainty. Acting in insecure regions only makes sense if the necessary expertise is already available.

These four levels of growth should therefore not be regarded as stand-alone measures, but as a kind of roadmap. First, the existing product is successfully positioned on the existing market, then further markets that make sense for the product are opened up. Subsequently, a new product development can be positioned on a market in which the company already has expertise in dealing with the target group. If a company then has enough expertise with these growth processes, diversification proves to be useful in order to design a future-oriented portfolio and minimize risks. However, care should be taken to ensure that the products are compatible with the company's own strategy in order to enable clear overall corporate positioning.

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