Product market matrix

Graphic representation of the elements from the original Ansoff matrix

The Product-Market-Matrix (also Ansoff-Matrix , after its inventor Harry Igor Ansoff or Z-Matrix ) is a tool for the strategic management of companies. It can be used by a management (= company management ) who has decided on a growth strategy as an aid for planning this growth.

The original

The product-market matrix considers the potentials and risks of four possible product-market combinations:

	Existing products	New Products
Existing markets	Market penetration	Product development
New markets	Market development	Diversification

Market penetration

The company tries to grow in an existing market by increasing the market share of existing products through market development . This is basically done by increasing sales with existing customers, selling the products to new customers, attracting customers who previously bought from the competition, or a combination of these possibilities. This strategy carries a low risk because it can make use of existing resources and skills. However, growth is usually limited: when the market is saturated , you have to switch to a different growth strategy.

The Marktdurchdringungsgrad ( English penetration rate ) is calculated as follows:

${\displaystyle {\text{Marktdurchdringungsgrad}}={\frac {\text{Anzahl der Kunden eines Unternehmens}}{\text{Gesamtzahl aller potenziellen Kunden auf dem Markt}}}\,\cdot 100\,\%}$

The lower the degree of market penetration a company has, the more market potential it can exploit for itself in the context of marketing .

Product development

With this strategy, companies try to satisfy the needs of their existing market with new products ( innovations ) or by developing additional product variants . This approach can be beneficial for companies whose strengths are related to specific customers rather than specific products. Due to the need to acquire new skills and the unpredictability of the success of the new development, product development entails significantly higher risks than market penetration.

Market development

The company tries to enlarge the target group for already existing products by opening up new market segments or new geographical regions (regional, national, international). This strategy is recommended for companies that have geared their skills and philosophy to a specific product rather than a specific market. However, by expanding into a new, unfamiliar market, the risk of this strategy is higher than that of mere market penetration.

Diversification

The product diversification is the riskiest of the four considered growth strategies. It not only requires the development of a new product, but also the opening up of new markets. In individual cases, however, it can be justified by the chance of a high return on investment . Other advantages can include entering a potentially attractive industry or reducing the general business portfolio risk.

Depending on the level of willingness to take risks, one can distinguish between three types of diversification structure:

a) Horizontal diversification: The existing product range is expanded to include products that are still factually related to the original.

b) vertical diversification (differentiation): This corresponds to the increase in the depth of the product range, either in the direction of sales, i.e. forward integration , or in the direction of the origin of the products, this is backward integration .

c) Lateral diversification: Here the advance into completely new market and product areas is considered. The company has to leave its traditional industry to invest in distant business areas. There is no connection here to previous business. This form is also seen as the most risky form in strategic marketing. Mannesmann's entry into the mobile communications sector at the end of the 1980s can be seen as a successful example .

Expansion of the concept

In the following expansion of the Ansoff matrix, Philip Kotler shows a new approach to market share growth with reference to Madique & Zirger.

	Existing products	Modified Products	New Products
Existing target group and geographic market	Sell ​​more existing products to existing customers (market penetration)	Modify existing products and sell more of them to existing customers	Design new products that appeal to existing customers (new development)
new geographic market	Sale of existing products in other geographic regions (geographic expansion)	Offer and sell modified products in new geographical regions	Development of new products for potential customers in new geographic regions
new target group	Sales of existing products to new types of customers	Offer and sale of modified products to new types of customers	Development of new products and sales to new types of customers (diversification)

This representation incorporates broad definitions of the original model in the five additional categories that are created. Especially in industries with relatively short product life cycles , the new model can be applied more easily, since the difference between an existing and a new product can be considerable and there are often generations of modified products between really new ideas.

criticism

Ansoff's product-market matrix was the first analysis grid for strategy selection and the predominant strategic thought pattern of the 1960s and 1970s . However, there are several factors that the model does not take into account, so that the following restrictions must be made on the informative value:

• The generation of strategies is limited to growing markets and to the extrapolation and pragmatic improvement of the current situation in a company.
• Internal weaknesses and strengths of the companies working with this strategy are not revealed.
• The competitive dimension, customer and competition-related aspects are left out.
• The coordination of the individual strategic business units is not taken into account with regard to the utilization of their resources and their risk situation.

See also

• List of controlling instruments

literature

• Hermann Simon, Andreas von der Gathen: The great manual of strategy instruments. All tools for successful corporate management. Campus Verlag, 2002, ISBN 3-593-36993-1

Individual evidence

1. ^ Harry Igor Ansoff: Checklist for Competitive and Competence Profiles ; Corporate Strategy, New York 1965, McGraw-Hill, pp. 98 f.
2. ^ Philip Kotler: Kotler on Marketing New York 1999, The Free Press, ISBN 0-684-86038-4 ; P. 47.
3. ↑ Modesto A. Madique, Billie Jo Zirger: A study of Success and Failure in Product Innovation: The Case of the US Electronics Industry , IEEE Transactions on Engineering Management, November 1984, pp. 192-203.
4. ^ Heribert Meffert: Marketing . Gabler, ISBN 978-3-409-69018-8 , pp. 264 f.

Web links

• Product-market matrix - definition in the Gabler business dictionary