Ansoff's Matrix (AQA A Level Business): Revision Note

Lower risk

• The business already understands its existing product and market, avoiding the added risk of unfamiliar customers or an unfamiliar and untested product

Relatively low cost

• Increasing marketing spend or introducing a loyalty scheme is usually far cheaper than developing a new product or entering a new market

Builds on existing brand strength

• Deepening loyalty around an already-trusted brand tends to be quicker than building trust with entirely new customers

Can be implemented quickly

• Since no new product development or unfamiliar market research is required, growth can often be achieved in the short term

Limited by the size of the existing market

• Once most potential customers are already loyal, there is a ceiling on how much further growth this strategy alone can achieve

Risk of price wars

• Competing more aggressively for the same customers, for example through discounting, can trigger retaliation from rivals

Over-reliance on one market or product

• Since all growth comes from a single area, a downturn there, such as a change in consumer tastes, affects the whole business severely

May attract regulatory attention

• Growing market share too far can raise competition concerns, potentially triggering an investigation by a body such as the Competition and Markets Authority (CMA)

Makes use of an already proven product

• Since the product itself does not need to change, the business avoids the cost and risk of new product development

Spreads risk across more markets

• If sales fall in one market or region, growth or stability in a new market can help offset the loss

Can extend a product's life cycle

• A product reaching maturity in its original market can be relaunched into growth elsewhere instead of declining

Requires research into unfamiliar markets

• A business may misjudge the needs, tastes or regulations of a new market, especially if it is a different country

Cultural or legal differences can undermine success

• A product that works well domestically may not suit consumer preferences abroad, or may fail to meet different regulations, such as food safety standards

Higher marketing costs

• Building brand awareness among an entirely new customer base is more expensive than marketing to already loyal customers

Currency and political risk

• Entering foreign markets exposes a business to exchange rate movements and political instability that do not affect purely domestic growth

Builds on strong existing customer relationships

• Since the business already understands its existing customers well, it can design new or improved products more likely to succeed

Extends the life cycle of a successful brand

• Regularly refreshing a product prevents it from stagnating as customer tastes evolve

• E.g. Lindt's yearly Christmas relaunches, often with only a subtle design change, recapture customer interest without the cost of developing an entirely new product

Strengthens brand loyalty

• Customers who see a business regularly innovating may feel more engaged and continue to choose that brand over competitors

Harder for rivals to imitate quickly

• A business with strong research and design capability may create innovations competitors cannot easily copy, protecting its advantage for longer

Expensive and time-consuming

• Research, design and testing of new or improved products can require significant investment before any return is seen

Risk of product failure

• Even with a strong existing customer base, there is no guarantee a new or updated product will be well received

Risk of cannibalising existing sales

• A new or upgraded version may simply replace sales of the existing version rather than generating genuinely new sales, limiting the overall growth achieved

Spreads risk across different markets and products

• If one part of the business suffers a downturn, other unrelated areas may continue to perform well, protecting overall profit stability

• E.g. Tesco's banking products are largely unaffected by a downturn in grocery retail, helping to stabilise overall group profit

Opens up entirely new sources of revenue

• Moving into a fast-growing or profitable new market, unrelated to the core business, can significantly boost overall growth

Builds on an existing brand name to reduce launch risk

• Customers who already trust a business may be more willing to try new, unrelated products than they would from an unknown brand

• E.g. Greggs' range of clothing and homeware relies on strong existing brand recognition to attract interest despite being entirely unrelated to its food products

The most risky of Ansoff's strategies

• The business has no existing experience of either the new product or the new market, meaning both variables are unfamiliar at once

Requires significant new expertise and investment

• A business may lack the knowledge, skills or infrastructure needed to succeed in an entirely unrelated market

Risk of brand dilution

• Launching products unrelated to a business's core identity can confuse customers about what the brand actually stands for, weakening its reputation

Management may lack focus

• Spreading senior management attention and resources across very different areas of the business can reduce the quality of decision-making in each