Ansoff (1957) designed a framework called Ansoff Matrix. This strategy helps identifying corporate growth opportunities, also analysing companies based on market, product with possible growth opportunities which can be established by merging current and new products.
Ansoff identifies four generic growth strategies, these are:
1. Market Penetration – tool used to increase organisations share in the market with its current product line.
2. Market development – seeking new markets for already existing products.
3. Product development – introduce new products to an existing market.
4. Diversification – developing new products which are offered to new markets.
Ansoff Matrix framework (Tesco case study)
3.1. Market Penetration
This involves persuading existing users to purchase from Tesco instead of its competitors e.g. persuading competitor’s customers to shop for grocery at Tesco.
Johnson et. al (2011) reasons that organisations seeking to penetrate the market will face two restraints which are competitors retaliation and legal constraints. Tesco has resources enabling them to utilise it in various marketing techniques to penetrate emerging market. This includes various marketing and promotional campaigns as well as heavy advertisements.
3.2. Market development
Although, market development is beneficial to businesses by helping to maximise its shareholders wealth (MSW) but it is also a limitation. In 2007 Tesco decided to enter the United States market. In five years Tesco has managed to open 185 stores in America.
However, in December 2012 Tesco’s executives decided to shut down all operations in America. Due to huge losses recorded in America which is having an impact on its overall operation revenues, especially in the UK.
Tesco also has failed to recognise competitors’ such as Wal-Mart and Kroger dominance in the American market
3.3. Product development
Johnson et al (2011)
References: Richardson, M, & Evans, C., 2007, 'Strategy in Action Applying Ansoff 's Matrix ', Manager: British Journal Of Administrative Management, 59, pp. i-iii, Business Source Premier, EBSCOhost, viewed 26 November 2012 Vernon, M. 1966, International Investment and International Tradein the Product Life Cycle, Quarterly Journal of Economics, 80, 190-207 Johnson, G., Whittington, R & Scholes, Kevan., 2011, Exploring Strategy: Text & Cases, 9th Edition, Patience Hall, Essex