8.1 a Ansoff Matrix

Question 1

What is the Ansoff Matrix?

Answer 1

A marketing planning model that helps a business determine its product and market strategy

Question 2

What is the output from the matrix?

Answer 2

Four suggested growth strategies

Question 3

What are the four growth strategies of the Ansoff Matrix?

Answer 3

• Market penetration
• Product development
• Market development
• Diversification

Question 4

Market penetration sells what products into what markets?

Answer 4

Existing products into existing markets

Question 5

What is the aim of market penetration?

Answer 5

To increase market share by getting existing customers to buy more

Question 6

What is the risk level in market penetration?

Answer 6

Very low

Question 7

‘Cadbury’ market penetration example:

Answer 7

Cadbury chocolates repackaged into Christmas selection boxes

Question 8

Situations that might make a business choose market penetration:

Answer 8

• Potential to grow in the market
• Existing customers would be willing to buy more of the product
• New customers could be attracted away from competitors

Question 9

Advantages of market penetration:

Answer 9

• Little risk
• Change is likely to be small
• Familiar with market

Question 10

Product development sells what products into what markets?

Answer 10

New products into existing markets

Question 11

‘Dyson’ product development example:

Answer 11

Producing hair-dryers as well as hoovers

Question 12

What is the risk level of product development?

Answer 12

Educated risk - new product aimed at existing customers who like similar products

Question 13

Situations that might make a business choose product development:

Answer 13

• Its current products are becoming obsolete

- They have a new innovative product

Question 14

Advantages of product development:

Answer 14

• Enables business to stay competitive
• Can develop product portfolio
• Gain a patent for new products

Question 15

Market development sells what products into what markets?

Answer 15

Existing products into new markets

Question 16

What is the risk level of market development?

Answer 16

Fairly high - no guarantee customers will buy new product

Question 17

Why do the government support market development?

Answer 17

They are keen to encourage international trade

Question 18

‘Lego’ market development example:

Answer 18

Produced new colours to sell into female market

Question 19

Situations that might make a business choose market development:

Answer 19

• Market segments that don’t buy its products
• Spare capacity to produce additional quantities
• Strong brand name

Question 20

Advantages of market development:

Answer 20

• Can use popularity of its products to attract a new group of customers
• Its not changing what it actually does
• Usually already a proven product

Question 21

What is a risk of market development?

Answer 21

• Cultural difference can cause successful products to fail in other markets e.g. B&Q in China

Question 22

Different approaches to market development:

Answer 22

• New geographical markets
• New product dimensions or packaging
• New distribution channels
• Different pricing policies to attract different customers

Question 23

Diversification sells what products into what markets?

Answer 23

New products into new markets

Question 24

‘HMV’ diversification example:

Answer 24

Diversified into the live entertainment market with the £40m purchase of several live music venues but exited the market soon after

Question 25

What is the riskiest strategy out of the four?

Answer 25

Diversification

Question 26

Situations that might make a business choose diversification:

Answer 26

- Current market is vulnerable - Does not want to risk everything on one product - Wishes to grow

Question 27

Advantages of diversification:

Answer 27

- Growth - Protects business from external influences in one particular market - Can create economies of scale

Question 28

What does the Ansoff Matrix look at?

Answer 28

The risk associated with a marketing strategy

Question 29

Disadvantages of Ansoff Matrix:

Answer 29

- Can over simplify risk - diversification may not be that risky if the change is not significant - Does not take into account how competitors may react