As part of your market strategy formulation process, one of the most important factors is deciding on what direction to take with regard to products and markets. The Product / Market Growth Matrix, developed by H. Igor Ansoff, is a handy tool for thinking about this situation.

The matrix shows the major choices that a company faces in its quest for growth. You need to think about your growth plans in each of these areas. Do you target new or existing markets with new or existing products? The results - in the boxes - are possible routes for the company’s growth strategy.

Market Penetration
Aim to sell existing products within markets that are already served - but in greater numbers.

• Works well in growing markets.
• Low risk, low cost.
• Very much a business-as-usual strategy.
• Stakeholders may perceive this as a low vision strategy.

Product Development
Develop new products for sale in existing markets.

• Should be an ongoing process.
• Uses existing knowledge and skills to develop new products for a market already understood.
• New product development risk only - far less than developing products for new markets.
• Marketing in general and market knowledge in particular are key skills for this strategy.

Market Development
Attempting to sell existing products into new markets. The new markets could be geographically based either at home or abroad or alternatively the new market could be a new market segment.

• Reduced investment in new product development.
• Main expenditure will be in marketing and sales.

Diversification
Basing your strategy on selling newly developed products within a new market.

• High risk - involves moving away from the products and customers you already know.
• Only undertaken when the justification for this course of action is compelling:
• • Your sales are falling dramatically – so this is one of the options you consider in re-inventing your business;
  • New technologies have opened up completely new market opportunities;
  • Major demographic changes have opened up completely new market opportunities.
• It pays to think very carefully about the reasons you will be successful in adopting this market strategy – and then to question them very carefully. Some of the things to consider:
• • You must have some strengths in your business that will help you succeed;
  • You must have at least some of the skills required.

Health Warning
In all cases, test your decisions with people whose judgement you trust – avoiding friends and family if at all possible. Make sure that you will not fall victim to the most dangerous business tools – two people and a flip-chart – or worse still, two people with a flip-chart and a spread-sheet!

This was a guest post by Paul Fileman of SPS who are a national team of proven senior management professionals, passionate about working to help businesses achieve their next level of development and performance. Whether they are facing market changes, financial problems, people/skills issues, or are preparing a major project, they offer dedicated support from a multi-disciplined team of experts.

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