This is a line that the Red Queen says to Lewis Carroll, the protagonist, in his famous novel Through the Looking Glass.
This quote is found at the beginning of the paper " Strategies for Diversification ," in which the Ansoff Matrix, a corporate diversification strategy framework, was first proposed .
Strategies for Diversification
(Source: Strategies for Diversification )
The paper states that for a company to survive in a rapidly changing market and environment, it needs to continue to grow, and that even to improve its position, it needs to work twice as hard and faster; however, there are almost no companies that have been able to achieve this by continuing with their existing products and market strategies.
As you can see from the fact that it is quoted at the beginning netherlands business email list of the paper, this line from the Red Queen represents the importance of a constant business diversification strategy for a company, and it is also a concept that I wanted to introduce as a preliminary mindset before learning about the diversification strategy framework "Ansoff Matrix" that I will introduce here.
In this article, we will explain in detail the Ansoff Matrix, a framework for considering corporate growth strategies that business managers and marketers should know. Please keep the Red Queen's words in mind as you read to the end.
What is Ansoff Matrix?
The Ansoff Matrix is a 2x2 matrix that shows a strategy for business diversification proposed by H. Igor Ansoff (hereinafter referred to as Ansoff) , a management scholar who is also known as the "father of strategic management."
Background of the development
Ansoff, a Russian-American business manager, published an article titled " Strategies for Diversification " in the Harvard Business Review , a management journal founded by Harvard Business School in 1957.
At the time, Ansoff had joined the famous Lockheed Aircraft Corporation and was recognized for his abilities, leading to him being appointed general manager of Lockheed Electronics, a subsidiary of the company that developed ground maintenance equipment and air traffic control computers in order to diversify the company's business.
The paper was inspired by Ansoff's practical experience at Lockheed and his disappointment with the company's management's lack of understanding of diversification strategy, and as with the quote from "The Red Queen" introduced at the beginning of this article, it strongly emphasized the significance and importance of diversification strategy, stating that constant growth is necessary for a company to sustain its current position. This paper resonated with many business managers and marketing professionals at the time.
ansoff_matrix
(Source: Strategies for Diversification )
The same paper also describes a strategy matrix that could be considered the prototype of the modern Ansoff matrix, which was further developed through Ansoff's subsequent works such as " Corporate Strategy " and "Strategic Management ", and is said to have become widely used by business managers in its current form.
Use cases for Ansoff Matrix
The Ansoff Matrix is also known in English as the Product/Market Expansion Grid , and as its name suggests, it is a framework for developing strategies for a company's business expansion from the two perspectives of "product" and "market," divided into "existing" and "new" in a total of four grids.
In order for your company to grow or continue, should you stick with your existing products? Do you need to develop new products? Should you continue competing in your existing market? Should you expand into a new market?
The Ansoff Matrix is a very useful framework not only for companies that have established a certain level of presence in their industry when planning further growth, but also for companies that are struggling to grow or maintain their current sales when they need to understand the current situation and try to restructure their business.
Ansoff Matrix: Four Growth Strategies
As mentioned above, if we divide a company's growth strategy into two main axes, "product axis" and "market axis," and further divide the product axis and market axis into "existing" and "new,"
Product axis: Should we compete with existing products or develop new products?
Market axis: Will you compete in your current market or enter a new market?
The direction of the two-axis, four-division approach emerges.
These four strategies are classified as "market penetration strategy," "new product development strategy," "new market development strategy," and "diversification strategy." The details are explained below.
Ansoff Matrix (1)
(Source: Ministry of Economy, Trade and Industry )
Market penetration strategy (existing product x existing market)
A strategy based on existing products and existing markets is called a "market penetration strategy." In the diagram in Ansoff's paper "Strategies for Diversification," introduced earlier, this is the item "Market Penetration." Roughly speaking, this is a strategy that aims to increase sales and market share by introducing existing products or services into the same market as before.
Specifically, it is a strategy to cultivate deeper into areas where there is still room for growth in product recognition and market share. It can be said to be an effective strategy under conditions where there are still few rivals, the market is not yet mature or saturated, or the product is new and recognition and demand have not yet been established.
Market penetration strategy is not just about maintaining the current strategy, or in other words, it is not a negative strategy that "stops running" as the Red Queen said. It is no different from other strategies in that you must always make sure that the above conditions are met through constant marketing activities and run at full speed to maintain and increase the pie (share) of your existing products in the existing market.
New product development strategy (new product x existing market)
A strategy that aims to increase sales and market share by developing and launching new products into existing markets, which is referred to as "Product Development" in "Strategies for Diversification," is called a "new product development strategy."
