What Are the Four Strategies in the Ansoff Matrix?
Learn the four Ansoff Matrix strategies for A Level Business, with clear definitions, a café example and a quick way to avoid mixing up products and markets.
The four strategies in the Ansoff Matrix are market penetration, market development, product development and diversification. The matrix helps a business consider growth by asking two questions: is it selling an existing or new product, and is it targeting an existing or new market?
The Four Strategies
- Market penetration: Sell more existing products in existing markets. A business might use advertising or a loyalty scheme to increase sales to its current customers.
- Market development: Sell existing products in new markets. For example, a business might start selling its current range in another country or target a different group of customers.
- Product development: Sell new products in existing markets. A business might introduce a new product for customers who already buy from it.
- Diversification: Sell new products in new markets. This takes the business beyond both its current product range and its current customers.
A market means the customers a business is trying to sell to. Whether a product or market counts as new depends on the business in the question, not on whether it is new to everyone.
Worked Example
Suppose a café sells coffee to local customers. Encouraging those customers to buy coffee more often is market penetration. Selling the same coffee in a new town is market development. Adding smoothies for its local customers is product development. Launching a range of packaged meals for supermarkets could be diversification, because both the product and the target market are new to the café.
Common exam mistake: Do not mix up market development and product development. In market development, the market changes; in product development, the product changes. Diversification generally carries the most risk because the business must learn about both a new product and a new market.
