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The Ansoff Matrix

Quality Tools > Tools of the Trade > The Ansoff Matrix

 

One of the problems for companies when looking to expand and grow is what to do next. When as many of your target customers who are going to buy your product have bought it, then where next?

 

In general, there are two major dimensions in which companies look for growth: products and customers. Strategist Igor Ansoff showed how the choices here can be divided into four strategies, with current or new products and current or new customers. This can be displayed in what is known as the ‘Ansoff Matrix’ (where ‘customers’ is translated into ‘markets’). For ‘products’ here, by the way, read ‘products, services and other offerings’. The Ansoff Matrix was developed in the 1960s, when physical products were the major concern.

 

 

The impact of the choice has great significance both for business operations and also for the quality approach taken.

 

Market penetration

If you want to keep the same products and the same customer base, then you have to find ways of penetrating the current market, selling to even more customers. Product quality issues do not change – the major thrust here is in marketing and the important of competition increases sharply.

Quality in market penetration is largely in communication, getting the right message to the right customers. If the result is significantly greater demand, then attention must also be paid to logistics channels.

 

Market development

Selling the same products to new customers means going into new market segments, selling to people who are not like your normal customers. This needs significant market research, including into customer needs and patterns of buying as well as into competitors, logistics and others factors that affect the costs, risks and potential in the target segments. Quality of information and analysis here is critical. A faulty statistical analysis of market data could result in a catastrophically decision.

 

Product development

In some ways, this is the easiest choice: to make new or improved products for customers who you understand and who know and (hopefully) like you and your products. Quality here should already be well-understood product quality activity, although if ‘development’ includes moving into service, then the difficulty of getting service quality right looms large.

 

Diversification

The most difficult of all endeavours is to go into new markets with new products. This is very much like acting as a start-up company as you have little experience in either and many mistakes can be made. Quality concerns now cover all areas, from market analysis to product design, manufacture, delivery, sales and service. Diversification requires investment in many parts of the company – if you are involved in such a bold move, do make sure that there is enough investment in quality and quality management as well.

 

Next time: The GE Portfolio Matrix

 

This article first appeared in Quality World, the journal of the Chartered Quality Institute

 

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