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Understanding Business Expansion With Ansoff Matrix

By Mei BeiNo Comments

Every company aspires to expand. Success leaders and entrepreneurs constantly strive to improve and expand their businesses, no matter the size of their business. They must devise new strategies to boost sales and attract new customers and clients. There are many possibilities, including creating new products or going after untapped markets. How would you decide which strategy is most ideal for your company? The Ansoff Matrix provides four approaches to a company’s growth and expansion while assessing the risks involved. It assists leaders and entrepreneurs in creating the best growth strategy based on their operations and situation.

What Is The Ansoff Matrix?

Ansoff Matrix is a two-by-two framework used in the strategic planning process to acquire an overview of potential growth possibilities and risks. It is also known as the Product and Market Expansion Grid. The Ansoff Matrix was established to evaluate and guide business decisions while a new growth plan was being developed. Since its introduction, businesses have used this planning tool to coordinate crucial marketing strategies for expansion efficiently.

The father of strategic management and Russian-American applied mathematician, H. Igor Ansoff, created the matrix in a 1957 article in the Harvard Business Review.  In order to assist business growth, the Ansoff Matrix is frequently used in conjunction with other business and industry analysis techniques, such as the PESTLE, SWOT, and Porter's 5 Forces frameworks. Marketers frequently use it to assess chances for businesses to boost sales by presenting alternate pairings for new markets.

Understanding The Ansoff Matrix

The Ansoff Matrix is a foundational framework that is utilized worldwide. It is an easy and straightforward approach to picture what a business can accomplish when considering development potential. On the X-axis are ‘products’, and on the Y-axis are ‘markets’. Within the Ansoff Matrix, the term "markets" may be defined differently. It could refer to a region or geography, like the North American market, or customer segments, like the target market or demographics. The Matrix is used to assess each strategy's level of risk in addition to how enticing it is to use existing markets and products as leverage against new ones. The matrix's four boxes are shown below. 

  • Market Penetration: Increased sales of current products into an existing market
  • Market Development: Focuses on marketing current items into new markets
  • Product Development: Focuses on bringing new items to an existing market. 
  • Diversification: The idea of entering a new market with entirely new products. 
Elements of Ansoff Matrix

Ansoff Matrix Strategies 

Market Penetration 

A market penetration strategy is used when businesses want to expand sales to their current customers and gain market share. A company that uses a market penetration strategy aims to sell more of its current products into markets that it is already familiar with and with whom it has established ties. The present marketing mix can be altered to achieve a market penetration plan. This can be achieved through upgrading promotional strategies, changing price strategies, and other means.

Execution approaches include:

  • Stepping up marketing initiatives or simplifying the distribution chain 
  • Lowering costs to draw in new customers in the market segment 
  • Acquiring a rival in the same industry

Market Development 

A market development approach is the next least risky strategy because it does not necessitate a significant amount of investment in product research and development. Instead, it enables the business to leverage existing products and introduce them to another market. Different geographic regions or new customer segments can also be considered new markets. Before implementing marketing development strategies, ensure the new customer base is familiarised. 

Strategies include:

  • Serving a different customer base or target market 
  • Launching a new domestic market or regional expansion
  • Launching an overseas market entry or international expansion 
  • Revamp the package for your goods
  • Change your distribution method

Product development 

The goal of a product development plan is to create new, better products for an existing consumer base. A business must have a thorough understanding of the market’s current dynamics and customer demands. Companies can expand their product portfolio by adding new goods based on these variables. For instance, as consumer needs change, the automobile sector is shifting to driverless vehicles. There is increasing concentration on creating electrified and self-driving vehicles as concerns about environmental pollution increase.

Consider it as a test of brand loyalty:

  • Spending on research and development to create a whole new product line
  • Obtaining the rights to manufacture and market a product made by another company


Both market development and product development are necessary, and diversification strategies are typically the riskiest strategy of the four. Although it carries the greatest risk, it has the potential to produce enormous returns, either by creating whole new revenue streams or by lowering a company's reliance on a particular product or market fit. Diversification strategies can be divided into two categories: related and unrelated.

Related Diversification

  • When a business expands its product options while maintaining commonalities in a known market. 
  • When there may be opportunities for the existing company and new product or market to have synergy. 
  • Example: A leather shoe manufacturer who decides to make leather vehicle seats. There will be synergy in obtaining raw materials as they utilize similar materials in their production. 

Unrelated Diversification

  • Being riskier than related diversification, it is when a business expands into a market they have no prior experience. 
  • Where it is improbable that there would be any significant synergies between the current business and the new product or market.

How To Use The Ansoff Matrix

Weighing your options carefully before selecting a growth strategy. It can assist you in expanding your company while taking into account the corresponding risks and available resources. 

The following advice will assist you in comprehending the strategy that best fosters business growth:

Market Penetration

Update and reorganize your marketing approach and new target markets. Introduce deals and specials to boost demand for your goods and services while expanding your market share.

Market Development 

Conduct a political, economic, social, and technological (PEST) analysis or use a cultural, administrative, geographic, and economic (CAGE) distance framework to identify the opportunities and risks in your market. Utilize market segmentation to target various demographics and look at other sales channels that have not been used.

Product Development 

Introduce new product lines or redesign existing products to boost sales in the target market. Concentrate on enhancing time to market and customer service to boost sales and brand equity.


Trials must be conducted continuously and repeatedly on product opportunities and failures. 

Benefits Of Ansoff Matrix 


Organizations can evaluate their growth goals using the Ansoff Matrix. 

Every alternative is weighed and evaluated in order to determine which is best as it grows. 


The Ansoff Matrix is simple to comprehend and use. 

It presents four potential growth plans in an easy-to-understand manner, making it easier for decision-makers without a background in marketing. 

Risk Analysis 

The matrix makes sure that companies don't run into unanticipated hazards after putting these tactics into practice. 


It offers a number of growth strategy options, assisting you in choosing the optimal one depending on your goals and plan.

Ansoff Matrix Example

Ansoff Matrix has been used by businesses in successful circumstances as a component of their business strategy.

Apple Inc

Since the iPhone's introduction in 2007, Apple Inc. has increased anticipation with each new iPhone release. One of the most illustrative examples of product development is the iPhone from Apple. Apple has consistently made significant resource and development investments to enhance its products. They implement new features into every new device they introduce. As a result, their clients will constantly anticipate the next big thing. Since 2007, this strategy has had a favorable impact on the company's sales and assisted in accelerating Apple's global expansion. 

A fantastic strategy to satisfy your customers is to stay on top of industry trends and look ahead to the next big thing. Additionally, it will support your long-term competitiveness. Apple's iPhone product development approach has aided in establishing a market for the company as the likelihood that customers will buy the upcoming iPhone is nearly certain. In order to successfully implement this strategy, an extensive analysis of the market is needed. It is important to promote the new product to current customers to win them over and make sure it is compatible with your current offerings. 

Xiaomi Inc

With its Android-based operating system, Xiaomi Inc., a Chinese mobile phone manufacturer, joined the market in 2011. It has since grown to be one of China's largest corporations. Since entering the mobile phone market, the company has used a diversification strategy by introducing goods including electronics, home appliances, software, and bags. 

To stay competitive, it has made research and development investments and opened sales offices in various locations, including India, Malaysia, and Indonesia. Xiaomi Inc.'s diversification approach has played a role in accelerating business expansion. Focusing on new markets also helped to increase the number of clients.

Coca Cola

  • Market Penetration

With the immense popularity of Coca-Cola’s brand, the company has been able to market penetrate the market by establishing a yearly special during Christmas, such as through the infamous Coca-Cola Christmas commercial, which has helped increase sales over the holiday season.

  • Market Development

Being inspired by Diet Coke, the introduction of Coke Zero in 2005 is a perfect example of market development. Diet Coke was found to be more favored among women, and it was discovered that men tend to avoid Diet Coke due to the perception that it is a women’s drink. With a totally opposite campaign in the black-colored poster, Coke Zero has successfully created a more masculine appeal. 

  • Product Development

The introduction of Cherry Coke in 1985 was Coca-Cola’s first variation outside of its original recipe, which started with a small idea of adding cherry-flavored syrup to Coca-Cola. Since then, the company has successfully introduced other flavored varieties, including lime, lemon, and vanilla.

  • Diversification

Related diversification: Coca-Cola expanded its product line to include healthy drinks in response to the drop in sales of carbonated soft drinks because it anticipated a future market shift toward beverages with less sugar.

Unrelated diversification: Coca-Cola often avoids taking risks in unfamiliar markets and instead utilize its brand image to expand inside the beverage sector. Having said that, Coca-Cola sells official goods such as pencils, glasses, refrigerators, and shirts.

Example of Coca Cola's Ansoff Matrix


Ansoff Matrix is a valuable tool that can be used to launch new products and diversify product range. As a result, market share is increased, and more revenue can be generated. It helps in the planning of a business or a product’s growth strategy by examining the risks and opportunities involved with each strategy. By evaluating, it is vital to determine whether your company would be able to contain or mitigate those risks. This will assist you in making strategic choices to diversify and expand your product line to enter new markets possibly.


What Is Ansoff Matrix

Elements of Ansoff Matrix

Insights of Ansoff Matrix

How To Use Ansoff Matrix

Example of Ansoff Matrix

Ansoff Matrix Example: Coca Cola

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