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© APT Initiatives Limited, 2009 TOPIC:Topic 1: Business Organization and Environment LESSON TITLE:Ansoff’s Matrix COMPETENCY FOCUS: Entrepreneurship (S4): To develop your entrepreneurial skills in preparing a realistic proposal for a new business start-up. You will understand the process a business will have to go through when starting up, including the underlying principles of starting a business. [IB Learner Profile Development: Inquirer] Learning Objectives By the end of the lesson, you should be able to… LO1) To list the 4 categories in Ansoff’s Matrix LO2) To explain the value of the Ansoff’s Matrix as a decision-making tool LO3) To apply the Ansoff Matrix growth strategies to a given situation. SMSC: You will assess the organisational culture of businesses in terms of fundamental structure, purpose and strategy development. CRITICAL THINKING KEY: Knowledge Application Analysis Evaluation
© APT Initiatives Limited, 2009 The Ansoff Matrix - Overview RISK DiversificationMarket Development New Product Development Market Penetration PRODUCTS ExistingNew RISK MARKETS New Existing
© APT Initiatives Limited, 2009 Market Penetration More of same product to same type of people / present markets Only possible if: Market growing or Firm has CA to gain share from rivals Least Risky
© APT Initiatives Limited, 2009 Market Penetration Achieved by: a)Increasing frequency or Qty purchased amongst existing customers b)Attracting users of competitors’ brands Thus, requires: Sound knowledge of customers, competitors Research into opinions of non-users Emphasis often on promotion eg of: Present product benefits / uses New product uses
© APT Initiatives Limited, 2009 Market Development Increasing sales of present products by selling to new markets Assumes new markets that can be exploited profitably More risky than penetration: Involves one unknown Requires more extensive research
© APT Initiatives Limited, 2009 Market Development Achieved by targeting: a)New segments in present geographical markets or b)New geographical markets Difficult if strong cultural differences exist Emphasis often on promotion – careful advertising to effectively position product
© APT Initiatives Limited, 2009 Product Development Selling new product to present markets R&D = high cost + risky However, new does not mean brand new Eg could involve : changing material, ingredients, colour adding new feature introducing new size improving functional performance
© APT Initiatives Limited, 2009 Diversification Selling new products to new markets The most risky – 2 unknowns, often requires considerable research and investment However, can help spread risk – firm less vulnerable to changes in one market Often adopted when: market saturated intense competition falling sales - other factors eg recession
© APT Initiatives Limited, 2009 Diversification 2 Main types: Related - link with present markets and products eg biscuit manufacturer into cereals (food industry) Unrelated - completely different industry eg biscuit manufacturer into financial services The more unrelated, the… higher the cost, greater the risk
© APT Initiatives Limited, 2009 Other Strategies Withdrawal / Retrenchment Consolidation Do Nothing – maintain existing operations, products, markets
© APT Initiatives Limited, 2009 Closing Comments The right strategy? Depends on situation, objectives, resources Takes into account internal / external factors Builds on strengths, explores opportunities Realistic regarding resources + agreed Eg: Plenty of opportunities in current market - MP Fierce competition - consolidate or DIV Strong in R&D - confidence with NPD
© APT Initiatives Limited, 2009 Group Task In groups, you will be given a company. You will need to apply that company to the matrix and justify why you think it adopts that particular strategy. [30mins]
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