The Ansoff Matrix
(Also Known as the
Product Market Expansion Grid,
the Growth Vector Matrix
and the Product Market Matrix)
H. Igor Ansoff first published the now well-known growth vector matrix or product-market matrix in the Harvard Business Review in the Sept/Oct edition of 1957. The matrix also appeared in the book written later by Ansoff and published in 1965 – Corporate Strategy. Although this matrix was published a long time ago, it still remains one of the most popular matrices and is used to identify the basic alternatives strategies, which are options for a firm wanting to grow. Strategic Emphasis
Ansoff developed the matrix out of his realisation that a firm needs a well-defined scope and growth direction. For most companies growth is often the prerequisite for survival. Ansoff felt that many of the theorists had too broad a concept of business and that the traditional identification of a firm with a particular industry had become too narrow. This was because many firms acquired a diverse range of products through policies of vertical and horizontal integration to protect their existing markets, and also through new product development, done to exploit technological innovation and to develop new markets with opportunities for growth. The vector matrix is based on joint consideration of the implications of change in the product (technology) and / or the market and is perhaps the simplest and most basic statement of the strategic alternatives open to a firm who desires growth. The Approach
Ansoff found that some business concepts leave unanswered questions and the definition of the business is vital when putting a strategy together. (For example are long-haul trucking, taxicabs and car rental in the same transportation industry?) This is too broad a description as is “energy business” A common thread must exist – a relationship between present and future product-markets, which would enable outsiders to see where the firm is heading and to give guidance to inside management. The two key stakeholders are therefore the outsiders who perceive where the firm is heading and the insiders (management) who provide a map of guidance. Ansoff’s definition of a common thread is based on three factors: a. The Product – Market Scope which specifies the particular industries to which the firm confines its product – market position b. The Growth Vector which indicates the direction in which the firm is moving with respect to its current product – market position c. The Competitive Advantage which seeks to identify particular properties of individual product markets that will give the firm a strong competitive position. Product
The definition of a Product Line to Ansoff refers both to the physical characteristics of the individual products, (which include size, weight, materials, tolerances etc.) as well as the performance characteristics of the products (e.g. An aeroplanes speed, range, altitude, payload etc.) Market
In his original writings, Ansoff used the term ‘Product Mission’ instead of the term market. This terminology originates from the military and refers to a description of the job that the product is intended to perform. According to Ansoff, this terminology helps management to set up the problems in such a way that it can better evaluate the performance of competing products.
A product-market strategy is therefore a joint statement of a product line and corresponding set of product missions or markets, which the products are designed to fulfil. They are distinct paths that a firm can take towards future growth. Put simply, product-market strategy means the route chosen to achieve company goals through the range of products it offers to its chosen market segments. Strategy, to Ansoff, is viewed as an operator that is designed to transform the firm from the present position to the position described by the objectives, subject to the...