The Ansoffs matrix provides a very simple but very effective focus for considering different options for growth, and shows whether it is better to find new customers for existing products, offer more products to the existing consumer, or stay with existing products and attempt to gain a greater share of the market. Each section of Ansoffs matrix shows a strategy which would be used in times with what you are doing. There are four possible product/market combinations: Market development, Market Penetration, Diversification and Product Development. This can be shown in the figure below.
An established product in the marketplace can be tweaked or targeted to a different customer segment, as a strategy to earn more revenue for the firm. For example, Lucozade was first marketed for sick children and then rebranded to target athletes. This is a good example developing a new market for an existing product.
This involves increasing sales of an existing product and penetrating the market further by promoting the product heavily or reducing prices to increase sales. This strategy has the lowest risk strategy as the firm knows the product and the market. Market penetration is often used by supermarkets and large retail chains.
Diversification involves launching a new product in a new market. It can also be the most rewarding, as a fresh perspective on a market can often pay huge dividends and deliver a huge competitive advantage to a smart and able company. A lot of research is needed to get things right, and perhaps consultancies will be called in to help educate the business about its new
challenges. Diversification can also decrease risk, because a large corporation can spread certain risks if it operates on more than one market.
Product Development is a medium risk strategy as the business is familiar with the market but not the new product. The business develops/introduces new products into existing markets with the aim of selling the new product to existing customer groups. For example Microsoft with their Xbox2 game console introduced the Kinect, and there is an additional feature on that allows customers to play without the use of a controller, much like the Nintendo Wii. This is an example of a new product which simply needs to be added onto the existing model aimed at the existing market.
ANSOFF MATRIX APPLIED TO APPLE INC.
Apple Inc. has diversified immensely since its inception and has emerged to be the leader in the computer industry because of its unique and timely innovative products and services. Same can be explained with the help of Ansoffs matrix. Market development
The fourth and last strategy of ansoff is the market development. For market development and to increase revenue, Apple Inc. had a huge potential in emerging markets such as China and India. Even though there was intense competition in these markets, Apples differentiated strategy helped it develop its products/ services in these emerging markets. More than one million iPhones have already been sold and this reflects the demand for Apple products in other markets of the world. Market Penetration
The first strategy used by ansoff is the market penetration. This means that the existing market should be further developed that is selling more of your product in an existing market. This means that if Apple Inc. wants to sell more iPhones, it should convince the customers buying the product of its competitors to buy Apples products. There are several ways in which Apple Inc. might attempt to do so and two of them are: 1) Using pricing strategies:
This simply refers to advertise so that people get to know more about the
product being offered for sale and the organisation is able to maintain or to increase its market share. 2) Drive out competitors:
One of the main competitors of Apple Inc. is Samsung Electronics and it is very difficult for Apple Inc. to drive Samsung Electronics out of the market particularly after the launch of Samsungs android operating system. So the best that Apple Inc. could do is that it could promote massively its products and this should be supported by a good pricing strategy as this would make the products of its competitors unattractive.
The third strategy is diversification that is launching a new product in a new market. Apple originally started as Apple computers, best known as the Macintosh personal computers. Later Apple Inc. shifted towards a digital hub strategy which was initiated by the launch of the iPod in 2001, followed by the IPhone in 2007 and finally the iPad in 2010. This helped the company to diversify as it not only produced personal computers but also many other digital products.
The common thread for all apple products/services was the organisations innovation and unique design which differentiated Apple from its various competitors and gave the company a competitive advantage over the other companies.
The second strategy involves launching a new product to the firms existing customers. Apple Inc., already have a global presence, in major markets, and the company understands its customer inside-out, it arguably offers the best trade-off between risk and reward. By launching the iPad, iPhone and operating systems to the same audience Apple Inc. builds up integrated customer relationships across multiple platforms and therefore creates brand loyalty. This increases the likelihood of new products being a success.