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EXPANDING AWAY FROM
YOUR CORE HAS RISKS;
DIVERSIFICATION
DOUBLES THEM
ANSOFF’S MATRIX
F
irst published in 1957 in the
Harvard Business Review,
Ansoff’s matrix is a
marketing tool for planning the
strategic growth of an organization.
Created by mathematician Igor
Ansoff, it is intended for businesses
that are ready to expand and have
the resources to fund growth. The
matrix offers four possible strategies
that a company might adopt,
depending on the status of its
product and the conditions of the
market: market penetration, market
development, product development,
and diversification. In addition to
presenting these four strategic
options, the matrix also attaches an
inherent risk factor to each one. It is
crucial for decision makers to take
the risk factor into consideration,
lest it gamble too heavily with the
company’s existing resources.The four strategies
Each approach is differentiated by
whether products or services are
unchanged or new, and whether
they remain in the existing market
or are entering a new one. The least
risky of the four strategies is
“market penetration”—maximizing
sales of an existing product in an
existing market. In this approach,An organization needs to
develop and grow......and developing
new products to sell
in new markets
doubles that risk....but moving away from
existing products
is risky...Expanding away from
your core has risks,
diversification
doubles them.IN CONTEXT
FOCUS
Strategic planningKEY DATES
500 BCE The concept of
“strategic planning” is first
used in military campaigns
in ancient Greece.1920s Harvard Business
School develops the Harvard
Policy Model, one of the first
strategic planning approaches
to private businesses.1965 Igor Ansoff’s Corporate
strategy: an analytic approach
to business policy for growth
and expansion is the first book
on corporate strategy.1980 Michael Porter
introduces his theory of
competitive strategy.1989–90 Concepts of core
competence and strategic
intent are developed by Gary
Hamel and C. K. Prahalad.