Ansoff's Strategic Matrix

Strategic planning of the company is one of the steps of successful business development. This truth began to be formed from the beginning of the 20th century. And the idea quickly developed over a period of 100 years. The first units involved in long-term and medium-term planning were not permanent divisions or units in this field. Annual financial estimates - this concludes the strategic construction.

The founder of the idea

Igor Ansoff - a native of Russia who has lived most of his life in the US, gives one of the simplest and most understandable definitions of strategic planning. In the opinion of this specialist, an analytical, logical process that presupposes the future position of an enterprise in the market by its forecasts must take into account the external environment. The Ansoff matrix is the most famous tool of the American mathematician-economist. Elementary in the understanding of the square of the forecast of development of the organization has won its simplicity a strong place in the strategic plans of almost every modern enterprise.

History of strategies

Only at the second stage of the development of planning, and this happened in the 50-60s of the 20th century, planning departments began to form at the enterprises, which were constantly engaged in the prospect of business development.

Finally, the idea of a development strategy of an enterprise declares itself as a necessity at the third stage - while increasing the competitiveness of European and Japanese firms with respect to American companies. And it is representatives of the latter who develop vivid economic and mathematical proposals.

Simple table

The initial form of the analytical tool is a square in which two axes are considered: vertical and horizontal. But is not it easier to consider it in the form of a table, having concluded 4 elements, which are behind the edges, into a common grid? Then the matrix takes the following form:

In such a representation it is much easier to understand the ways of crossing factors. And you can calculate the options for business development.

The Ansoff matrix: growth strategies

The idea itself implies a close relationship between the future and existing markets and products of the company. Any producer of services or goods can name the prospects for the development of their business. The strategy also determines the way in which the company needs to move, the existing risks when choosing an option. At the same time, it is important not only to determine the direction, but also to determine as precisely as possible existing sales markets, the consumer demand segment, to set the company's growth vector based on the real market position, and to determine the competitive advantages of the products and proposals currently being produced in the future. The strategic matrix of Ansoff will be an effective tool only if all of the above conditions are met.

The easiest way

By the number of columns and rows in the table, it is easy to determine that the American mathematician offered options for growth only 4. At first glance, it is not a very rich alternative. But the Ansoff matrix and long experience of its application prove the opposite.

1. Penetration to the market using existing products and markets, where the company works confidently, takes its segment and competitively. This development option involves an increase in sales. What can contribute to this? The following set of measures is possible:
   
   - the company increases market share;
   - the development of repeat sales, that is, the development of a network of regular customers;
   - increase in the number of products in the already conquered market segments;
   - the disclosure of such qualities of goods and services that involve their use in new areas.
   
   For any company, the Ansoff matrix is suitable. Product-market - the most obvious strategy. The costs of existing resources can always be calculated with the least risk.
   
   
2. If the strategy of developing new markets with the existing products of the company is chosen, it is necessary to adapt goods and services to new segments. Instruments in this case can be:
   
   - geographic expansion of sales areas;
   - development of new distribution channels;
   - development of new market segments.
   
   Such a development path can be chosen by a company whose marketing policy is developed to an effective level.
   
   
3. The third option Ansoff matrix involves the introduction of a new product in the already used markets. As a rule, enterprises that are engaged in the production of technical means are successfully using this method of development. It is their characteristics that should be updated to meet the higher requirements of consumers in the existing market. The chosen third strategy for the Ansoff matrix assumes the development of growth due to:
   
   - Updating the properties of the product, improving its quality, changing the status;
   - Offers completely new goods and services;
   - expansion of the product line;
   - offers to the consumer of existing goods and services of a new generation.

Risks and growth

The most risky choice of strategy is the last variant of the intersection of factors. The new market and product involve diversification. The company's exit to unfamiliar territories can be justified in extremely rare cases. As the Ansoff matrix shows, the "commodity-market", if not one of them is mastered, how the scheme can be considered only when:

• The impossibility of using the above three ways of development and growth;
• If the development of existing activities obviously does not bring the desired profit;
• If there is a lack of information for forecasting the stability of business with its usual development;
• Little or no need to invest in new projects.

The Ansoff matrix and its practical application in the banking sphere

The economic development of an enterprise directly depends on lending activities and other financial services. Banks in this niche occupy a central position. And the strategy of their activities is as relevant as the marketing planning of any enterprise.

The Ansoff's capabilities matrix is an effective tool for implementing proposed financial products, both new and proven in established sales markets. This is only about them, because most banks use the services of banks, and the search for unreached market segments is becoming less and less successful.

Improve what you are already doing

The obvious strategy, or as it is also called the "small ship" strategy, "cost savings", involves the following stages for development:

• Identification of weaknesses in similar services of competitors;
• Development of persuasion methods for potential clients who, in the end, should give preference to the product of this bank (in this case, the provision of pressure is categorically excluded, since its result can only have a temporary effect);
• Offer related services on favorable terms.

Existing financial products need to be improved, expanded and modified. This activity is based on intensive research work, the result of which is the positioning of the goods, that is, the need to determine its characteristics, features that differ from analogical services, substitute services.

On the basis of two stages of work, the assortment policy of the bank is designed. It implies the formation of a set of services, which determines successful activity in this segment of the market, provides economic efficiency, sets the development vector.

The last stage of the work is the assortment strategy. For its formation, it is necessary to consider the following ways of development:

• Differentiation of the service. It implies the allocation of a separate niche for the implementation of existing products, other than competitors' products.
• Narrow specialization. As a development strategy, it is chosen to provide products limited to certain characteristics of activities to the number of clients.
• Diversification of services. Expansion of the range and number of market sectors for the sale of goods, as a rule, the prerogative of universal banks.
• Vertical integration. The strategy is the embodiment of synergy.

Percentage

The Ansoff matrix and long-term experience of its use in practice made it possible to derive certain regularities in the success of this or that strategy, as well as the probable value of costs. A visual presentation of the percentage of risks to costs makes it possible to make marketing decisions with a clear understanding of the probability of losses.

The strategy of introducing new products in the existing market significantly loses in the indicator of success and the number of costs when choosing the option "old goods in the developed segment". Such indicators make it possible to say with confidence that for each enterprise the development alternative is limited to a number of circumstances, the external environment, economic opportunities and many other factors. The Ansoff matrix is only a tool that helps in choosing a strategy, which does not negate deeper analyzes of the enterprise's capabilities.