01 Ansoff’s Matrix

Ansoff’s Matrix:

Ansoff’s Matrix

IGOR ANSOFF’s MATRIX:

IGOR ANSOFF’s MATRIX Market Product EXISTING NEW EXIST MARKET PENETRATION Increase sales to existing market Penetrate existing market more deeply MARKET DEVELOPMENT Existing products sold to new markets NEW NEW PRODUCT DEVELOPMENT New products developed for existing markets DIVERSIFICATION New Products sold to new markets

IGOR ANSOFF MATRIX:

IGOR ANSOFF MATRIX MKT PRODUCT EXISTING NEW EXIST MARKET PENETRATION Little risk MARKET DEVELOPMENT Moderate Risk NEW NEW PRODUCT DEVELOPMENT Moderate Risk DIVERSIFICATION High Risk

IGOR ANSOFF MATRIX – Growth of TESCO:

IGOR ANSOFF MATRIX – Growth of TESCO MKT PRODUCT EXISTING NEW EXIST MARKET PENETRATION Increase in share of grocery business at the expense of Sainsbury MARKET DEVELOPMENT Move into convenience store market Expansion abroad NEW NEW PRODUCT DEVELOPMENT Expansion into Petrol Sales Development of financial services DIVERSIFICATION High Risk

Market Penetration:

Market Penetration Maintain increase market share in current market with current products Selling more of the same to the same people In saturated market - Difficult In stagnant market – grab market share from others – intense competition

Market Penetration:

Market Penetration Increase usage by existing customers Encourage increase in frequency of use Attract customers away from rivals / Gain market share at expense of rivals Devise and encourage new applications Encourage non-users to buy

Market Penetration:

Market Penetration Requires re-alignment of marketing mix

Use Market Penetration when - :

Use Market Penetration when - When the market is not saturated When there is potential of growth When competitors share is falling When increase in volume leads to economies of scale When there is scope to sell more to existing users

Market-Penetration Strategy:

Market-Penetration Strategy Why ? To dominate market How ? To increase usage or get new customers; reduce price; expand distribution or increase promotional activities When ? When market is growing What to look out for ? Competitive reaction; cost of conversion Example: Airlines used reduced fares & promotion various family travel packages to penetrate market

Slide 10:

A product- (new offering-) development strategy dictates that an organization create new offerings  existing markets. PRODUCT-MARKET STRATEGIES

Slide 11:

Developing totally new offerings. Adding different features, sizes, etc. to broaden the existing line. Enhancing the value to customers of existing offerings. PRODUCT-DEVELOPMENT STRATEGY Product Augmentation Product Innovation Product Line Extension This strategy involves:

Product Development Strategy:

Product Development Strategy New product to replace old product New innovative products Product improvements Product line-extensions New products to complement existing Products at a different quality level from existing product

Slide 13:

Factors to consider when adopting this strategy: The market size and volume needed for profitability. The magnitude and timing of competitors’ responses. The impact of the new product on the sales of existing offerings ( cannibalization ). The capacity of the organization to deliver the offerings to the market(s). PRODUCT-DEVELOPMENT STRATEGY

Product-Development Strategy:

Product-Development Strategy Why ? To satisfy buyer’s need How ? New or improved product; innovate or augment product When ? Customer has a need or a problem What to look out for ? Market size/volume competitor reaction effect on existing products resources to deliver new products

IGOR ANSOFF MATRIX:

IGOR ANSOFF MATRIX MKT PRODUCT EXISTING NEW EXIST MARKET PENETRATION Little risk MARKET DEVELOPMENT Moderate Risk NEW PRODUCT DEVELOPMENT Moderate Risk DIVERSIFICATION High Risk

Slide 16:

A market-development strategy dictates that an organization introduce its existing offerings to markets other than those it is currently serving (existing offerings  new markets). PRODUCT-MARKET STRATEGIES

Market Development Strategy:

Market Development Strategy Selling the same product to different market Entering new markets, segments with existing products Gaining new customers, new segments, new markets Requires changes in marketing strategy, distribution, pricing policy, promotional strategy

Use market development when:

Use market development when Untapped market is beckoning The firm has excess capacity Attractive channels to access new markets

Slide 19:

This strategy involves: Adjusting the marketing mix, such as: Analyzing competitors’ strengths, weaknesses, and potential for retaliation. Modifying the basic product offering Using different distribution outlets Changing the sales effort or advertising MARKET-DEVELOPMENT STRATEGY

Slide 20:

This strategy involves (continued) : Identifying the number, motivation, and buying patterns of new buyers. Determining the organization’s ability to adapt to new markets to evaluate success. MARKET-DEVELOPMENT STRATEGY

Slide 21:

Internationally, this strategy has four forms: Licensing Joint Venture/ Strategic Alliance Exporting Direct Investment MARKET-DEVELOPMENT STRATEGY

Slide 22:

Licensing Exporting Direct Investment Involves marketing the same offering in another country through sales offices or intermediaries. Is a contract where one firm (licensee) is given the rights to patents, trademarks, etc. by the owner (licensor) in turn for a royalty or fee. Involves investment by both a foreign firm and a local company to create a new entity in the host country. The two forms share ownership, control, and profits of the entity. Involves investing in a manufacturing and/or assembly facility in a foreign market. Is the most risky and requires the most commitment. Joint Venture/ Strategic Alliance MARKET-DEVELOPMENT STRATEGY

Market-Development Strategy:

Market-Development Strategy Why ? To venture into new markets How ? Sell existing products in new markets; modify product; use different distribution; use different advertising/sales strategy When ? Present market is saturated What to look out for ? Competitive reaction; understand new buyers; adaptability

IGOR ANSOFF MATRIX:

IGOR ANSOFF MATRIX MKT PRODUCT EXISTING NEW EXIST MARKET PENETRATION Little risk MARKET DEVELOPMENT Moderate Risk NEW PRODUCT DEVELOPMENT Moderate Risk DIVERSIFICATION High Risk

Diversification:

Diversification New products sold to new markets New products sold to new customers Select based on growth prospects which the two new variables offer that the present product-market does not

Diversification Types:

Diversification Types Related Beyond present product –market, but within present industry Synergistic diversification Lesser risk Unrelated Entirely new product and market Conglomerate diversification

Related Diversification:

Related Diversification Horizontal – new products introduced to current markets (new product development) Vertical – when an organization moves into its supplier’s or customer’s business Concentric – when new products closely related to existing products are introduced in new markets

Diversification Strategy (cont’d):

Diversification Strategy (cont’d) Three types of diversification Concentric, horizontal and conglomerate Three essential tests of success Attractiveness Cost-of-entry Better-off

Vertical Integration:

Vertical Integration Why? To gain operating economies i.e. to lower costs To gain access to or control supply demand To enhance technological innovation How? Integrate backward and forward When? Basic industry is in a growth stage What to look out for? Problems in managing very different businesses; increase risk, reduced flexibility; cost of excessive in-growing

Example of Vertical Integration:

Example of Vertical Integration Airlines integrate backward to in-flight kitchens; forward to travel agencies

Related Diversification:

Related Diversification Development beyond present product market mix but within the broad confines of the industry

Diversification Strategy:

Diversification Strategy Why ? Growth opportunities outside current business How ? New products for new markets When ? Distinctive competencies available What to look out for ? High risks, resources required, need to understand new markets, fit with distinctive competencies

Uses of Ansoff’s Matrix:

Uses of Ansoff’s Matrix A framework to explore directions for strategic growth Most commonly used model for strategic growth Identify and analyze growth opportunities Considers expected returns and risks

To Summarize:

To Summarize

Market Penetration:

Market Penetration Advertise - to encourage more people within your existing market to choose your product, or to use more of it Introduce a loyalty scheme Launch a price or other special offer promotions Increase your sales force activities Buy a competitor company (particularly in mature markets)

Product Development:

Product Development Extend your product by producing different variants, or packaging existing products it in new ways Develop related products or services In a service industry, shorten your time to market, or improve customer service or quality

Market Development:

Market Development Target different geographical markets at home or abroad Use different sales channels, such as online or direct sales if you are currently selling through the trade Target different groups of people, perhaps with different age, gender or demographic profiles from your normal customers.

Modified Ansoff Matrix – 9 Box Grid:

Modified Ansoff Matrix – 9 Box Grid Product – Market Existing Modified New Existing Market Penetration Product Extension Product Development Modified Market Expansion Limited Diversification Partial Diversification New Market Development Partial Diversification Diversification

Strategy Selection:

Strategy Selection

Slide 40:

Product-market strategies are evaluated based on: The organization’s business definition, mission, and capabilities. Market capacity and behavior. Environmental forces. Competitive activities. STRATEGY SELECTION

Slide 41:

Product-market strategies are chosen based on: Costs and benefits of a strategy. Analysis of competitive structure, market dynamics, and opportunity costs. Probabilities of success for a strategy. The product itself. STRATEGY SELECTION

Slide 42:

Action Response Outcome O 1 O 2 O 3 O 4 R 1 R 2 R 1 R 2 A 2 A 1 EXHIBIT 1.3: DECISION-TREE FORMAT

Slide 43:

Estimated profit of $1 million Estimated profit of $4 million Action Response Outcome Estimated profit of $2 million Estimated profit of $3 million Market- development strategy Aggressive competition Passive competition Aggressive competition Passive competition Market- penetration strategy EXHIBIT 1.4: SAMPLE DECISION-TREE

Slide 44:

Aggressive competition Passive competition Aggressive competition Price Strategy Communication Strategy Product Strategy Channel Strategy Customer THE MARKETING MIX

Slide 45:

Estimated profit of $4 million Estimated profit of$3 million Aggressive competition Price Strategy Communication Strategy Product Strategy Channel Strategy Kind of product, service, or idea offered. How the product, service, or idea will be communicated to buyers. Informs and assures buyers that the offering will meet their needs. Method for distributing the product or service to buyers. Satisfies buyers’ shopping patterns and purchase requirements. Provides information and offering availability. Amount buyers will pay for the offering. Represents the value or benefits provided. THE MARKETING MIX

Slide 46:

Estimated profit of $4 million Estimated profit of$3 million Aggressive competition Delivers customer value in market space , the new interactive capabilities of the Internet. Depends on the success requirements of the market. Must be consistent with both the needs of the markets and the organization’s capacity. Is as much art and science. FORMULATING THE MARKETING MIX

Slide 47:

BUDGETING MARKETING, FINANCIAL, AND PRODUCTION RESOURCES CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT

Slide 48:

A budget is a formal, quantitative expression of an organization’s planning and strategy initiatives expressed in financial terms. BUDGETING

Slide 49:

A master budget consists of: Focuses on the income statement. Also referred to as a pro forma income statement or profit plan. Focuses on the effect the operating budget has on the organization’s cash position. BUDGETING Operating Budget Financial Budget Special Budgets Focuses on developing advertising, sales, and other budgets that support the master budget.

Slide 50:

DEVELOPING REFORMULATION AND RECOVERY STRATEGIES CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT

Slide 51:

A marketing audit is a comprehensive, systematic, and periodic examination of a firm’s or business unit’s marketing environment, objectives, strategies, and activities to determine problem areas and opportunities and recommend a plan of action to improve the firm’s marketing performance. MARKETING AUDIT

Slide 52:

Addresses the following questions: Are we doing the right things? Are we doing things right? MARKETING AUDIT Strategic Operational

Slide 53:

Have the following purposes: Forces marketing managers to ask “What if…?” questions. Allows for contingency plans , preplanning of reformulation and recovery strategies that lead to faster reaction time in implementing remedial action. REFORMULATION AND RECOVERY STRATEGIES

Slide 54:

DRAFTING A MARKETING PLAN CHAPTER 1: FOUNDATIONS OF STRATEGIC MARKETING MANAGEMENT

Slide 55:

A marketing plan is a formal, written document that describes the context and scope of an organization’s marketing effort to achieve defined goals or objectives within a specific future time period. MARKETING PLAN

Slide 56:

Consists of: Each has these time dimensions: Focuses on a 1-year period. Focuses on a 3- to 5-year period. MARKETING PLAN Product Plan Business Plan Marketing Plan Short-term Long-term