The product/market grid of Ansoff is a model that has proven to be very useful in business unit strategy processes to determine business growth opportunities. The product/market grid has two dimensions: products and markets.
Over these 2 dimensions, four growth strategies can be formed:
- market penetration,
- market development,
- product development, and
- diversification.
Market Penetration:
Company strategies based on market penetration normally focus on changing incidental clients to regular clients, and regular client into heavy clients. Typical systems are volume discounts, bonus cards and customer relationship management.
Market Development:
Company strategies based on market development often try to lure clients away from competitors or introduce existing products in foreign markets or introduce new brand names in a market.
Product Development:
Company strategies based on product development often try to sell other products to (regular) clients. This can be accessories, add-ons, or completely new products. Often existing communication channels are leveraged.
Diversification:
Company strategies based on diversification are the most risky type of strategies. Often there is a credibility focus in the communication to explain why the company enters new markets with new products. This 4th quadrant (diversification) of the product/market grid can be further split up in four types:
- horizontal diversification (new product, current market)
- vertical diversification (move into firms supplier's or customer's business)
- concentric diversification (new product closely related to current product in new market)
- conglomerate diversification (new product in new market).
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