How to use Ansoff's growth matrix

In Ansoff's growth matrix, three different options are indicated that the company can pursue to achieve growth.

They are all based on the company's current activities, which are being intensified.
A distinction is made between three different intensification strategies.

Intensification means that the company achieves growth based on current activities.
The company can pursue one of the following intensification strategies:

• Market penetration (selling more of current products in current markets)
• Market development (sell more of current products in new markets)
• Product development (sell more of new products in current markets)

Market penetration

The company can achieve growth by selling more of current products in current markets. The company can penetrate the market in the following ways:

• Expanding the market through attracting new customers.
• Increase consumption by getting existing customers to buy more.
• New uses for the product.
• Conquer competitors' customers.

Market development

The company sells current products in new markets. Market development can happen in two ways:

• New export markets purely geographically, and in that way achieve growth.
• New customer groups in countries where the company already has activities.

Product development

The company achieves growth through the development of new product lines.
Product development can take place in the following ways:

• Range extension (line extension), where the company's range is extended with a new product line or new products can be marketed under the same brand (brand extension).
• Product improvement, where current products are given a new property or a new function.
• A new product is introduced that covers a new need.

Diversification

Diversification means growth through the sale of new products in new markets. Diversification can be seen as an independent growth strategy, as it creates a new business area, which can end with the establishment of a new company.

A distinction is made between two types of diversification:

• Concentric diversification
  The company markets new products to new markets where there is a certain overlap with the existing product portfolio, e.g. technologically or in terms of marketing. In this way, a synergistic effect is achieved.
• Conglomerate diversification
  The company takes on completely new business areas that are unrelated to the existing product portfolio.

Example of Ansoff's Growth Matrix - "Chocolate Factory Anso"

We create our own example with Ansoff's growth matrix, so that the model becomes concrete. Therefore, we use the fictional "Chocolate factory Anso" as an example.

The factory sees great opportunities for their chocolate bars, which are a healthier alternative to many of the big players on the market. They will therefore try to grow.

If the factory were to make use of market penetration, they could e.g. expand the dealer network. If we imagine that they have previously tried to stick to specialist stores, they could try more normal convenience stores such as 7/11 and Føtex.

If the factory were to make use of market development, could they expand to a country that has the same or similar culture and customer segments as the country the factory is already successful in. It could e.g. be expanding to Norway if you are already successful in Denmark.

If the factory were to make use of product development, could you try to create a new chocolate bar that appeals to a customer group that you don't already reach. Maybe you could create a cheaper version or an even healthier version.

Criticism of Ansoff's Growth Matrix

Ansoff's growth matrix has clear limitations, as in its immediate form it only uncovers opportunities – and thus does not take into account the possible challenges that may arise along the growth journey.

Download template on Ansoff's Growth matrix

Template: Ansoff Growth matrix