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ANSOFF

A business model for growing your company

In a 1957 edition of Harvard Business Review, Igor Ansoff proposed a model that is useful for working out how to grow a company. He called his article "Strategies for diversification". It resulted in a tool that is widely used for guiding the strategic growth of a company.

The matrix has four boxes, each presenting growth opportunities:

  • Selling existing products to existing markets – market penetration. This is a very obvious source of new business which can often be ignored. It should be easier to sell more to existing customers than to acquire new ones.

  • Selling existing products to new markets – market development. This situation offers opportunities for finding new customers in new geographical markets or in segments that are not yet served.

  • Selling new products to existing markets – product development. This is a strategy of brand extension. The trust in relationship that exists with the supplier puts it in a strong position to offer new products.

  • Selling new products to new markets – diversification. This is the most difficult of the growth strategies as it requires a company to find new customers with products it has not produced before. Although seductive, this can be a risky move.

For most companies, the easiest and often the most fertile place to look for growth opportunities is to sell more of the same to existing customers.  This means you need to know your share of wallet at each customer so you can assess the potential to sell them more.

The next place to look for growth is to sell your existing products to new customers.  What new segments could you attack?  Which countries where you do not sell at the present could be attractive markets for your products?

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