ProvenModels - product market matrix - H. Igor Ansoff
In the late 1950's, the Russian-American engineer, Igor Ansoff, a founder of strategic management, argued that strategic planning was essential for firms operating in a complex, turbulent environment. At that time, sociologists dominated the research on strategic adaptation of non-profit organisations primarily and concluded that ad-hoc management was appropriate when the demand and the technology in the firm's markets evolved incrementally. Ansolff's article, 'Strategies for Diversification', in the Harvard Business Review provided a practical framework for selecting a firm's expansion route in a growing market by reasoning that long-range planning was necessary to drive managerial decision making when the speed of change exceeded the firm's ability to respond. Ansoff simplified the competitive position of firms by defining two dimensions: 1. the products - what it sold; 2. the markets - to whom they are sold. Managing growth effectively required that new products fit within the firm's mission, organisational strengths and existing products. A 'common threat' between products had to exist to create synergy. A firm could make four strategic choices depending on the newness of the market and its products: 1. MARKET PENETRATION the relatively low risk strategy growth strategy directed towards selling existing products to existing customers primarily through well- known markets and products. A market penetration strategy seeks two objectives: maintain or increase the market share of current products; increase product usage of existing customers. This strategy works best in industries where economies of scale apply -- when the firm's average cost of producing and distributing products decreases as the size of its operations increases. To execute a market penetration strategy a firm requires a defendable competitive position to avoid likely retaliation from competitors. 2....
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