Ansoff Matrix Advantages And Disadvantages

What are the weaknesses and strengths of Igor Ansoff's model called the the Ansoff Matrix? Have any other theorists developed or improved a more modern model based on the same idea?

The weaknesses of Ansoff's Matrix include its inability to factor in things like competitor activity and consumer opinion. Its strengths include its ability to weigh up various options and examine the risks associated with each option. Other theorists who have come up with models more modern than the Ansoff Matrix include Michael Porter with "Porter's Five Forces" and Albert Humphrey with the "SWOT analysis."

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The Ansoff Matrix was developed by Igor Ansoff, a Russian American applied mathematician and business manager. The Ansoff Matrix was purposed to assist executive level managers and marketers in strategically planning for future growth and development. There are several advantages and disadvantages of the Ansoff Matrix. They are as follows:

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The Ansoff Matrix was developed by Igor Ansoff, a Russian American applied mathematician and business manager. The Ansoff Matrix was purposed to assist executive level managers and marketers in strategically planning for future growth and development. There are several advantages and disadvantages of the Ansoff Matrix. They are as follows:

Advantages:

  • It's beneficial for businesses and organizations looking to identify and analyze growth options.
  • It's most advantageous for business offering new products and services to new markets, also known as diversification. This is the riskiest strategy. However, it has the most growth potential.
  • It assists with market penetration through decreasing prices, increasing promotion and distribution, and acquisitions; this is the least risky strategy.
  • It assists with market development through utilizing different customer segments, gaining industrial buyers, and penetrating new areas/regions.
  • It's a useful tool for product development, where businesses introduce new products or services to existing markets.

Disadvantages:

  • The Ansoff Matrix could be inaccurate if it is used without other tools.
  • The Ansoff Matrix does not consider an organization's competitors and the strategies of those competitors.
  • It does not take into account the risks and challenges of organizational changes to policies and practices.
  • It can lead businesses and organizations into unknown business opportunities due to logical issues relating to diversification.
  • It leads to discrepancies related to new products, leading businesses and organizations into new markets.
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To answer this question, we first need to establish what an Ansoff Matrix is. In the most basic terms possible, an Ansoff Matrix is a grid that helps businesses to develop ideas that will increase their profits and gain them greater market share.

A basic Ansoff Matrix is divided into four quadrants: market development, diversification, market penetration and product development.

Marketers have identified several notable advantages to the Ansoff Matrix. Firstly, it is very simple to understand and use. This makes it easy for a representative of a marketing agency to explain their thinking to a client, who may understand little about marketing.

Being a visual aid, the Ansoff Matrix makes it simple to weigh up various options that may be possible. This matrix also provides an immediate indication of the risks associated with any strategy.

The flaws associated with the Ansoff Matrix relate to the information that the Matrix cannot provide, rather than flaws of the matrix itself. The first criticism is that the Ansoff Matrix ignores the activities of competitors, thereby creating unrealistic scenarios and putting a business at risk of operating in a "bubble" rather than considering external factors. In addition, the Ansoff Matrix is unable to factor in fluctuations in consumer opinions and needs. Lastly, the matrix does not provide a cost-benefit analysis of any option presented.

More than twenty years after the development of the Ansoff Matrix, Michael Porter developed "Porter's Five Forces", which I would argue is a fantastic tool, especially when used hand-in-hand with the Ansoff Matrix. The five forces which Porter states must be examined are: competitor rivalry, supplier power, buyer power, threat of substitution, and threat of new entry.

The simple SWOT analysis, examining strengths, weaknesses, opportunities and threats was developed by Albert Humphrey in the 1960s. While more simplistic than the other models discussed here, it provides a great start to any market research endeavor.

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The Ansoff Matrix was proposed by Igor Ansoff and presented in the Harvard Business Review in 1957 as a means for "marketers and small business leaders" to quickly develop a growth strategy ("Ansoff Matrix"; "The Ansoff Matrix--Understanding the Risks of Different Options"). The model, also called the Product/Market Expansion Grid, "shows four different growth options" for businesses as they match "existing and new products and services with existing and new markets" ("The Ansoff Matrix"). 

As Dr. David Ward explains in his article titled "An Overview of Strategy Development Models and the Ward-Rivani Model," the Ansoff Matrix consists of four different strategies:

  1. Market Penetration. Using this strategy, businesses penetrate current markets for current customers by more effectively marketing their existing products or services through "promoting the product, repositioning the brand, and so on" (p. 6).
  2. Market Development. Using this strategy, businesses introduce a current product into a brand new market by introducing it to a brand new audience.
  3. Product Development. Using this strategy, businesses market new products to their customer base that already exists. One example of product development would be "when existing models are updated or replaced and then marketed to existing customers" (p. 6). Both the technology and automobile industries use product development frequently.
  4. Diversification. Using this strategy, businesses market brand new products to brand new customers.


While the Ansoff Matrix is useful for businesses that compete solely based on market-pull, the model fails to take into account all of the elements that can impact a market, which if taken into account, could lead to a different, more beneficial growth strategy. As Ward asserts, one weakness of the Ansoff Matrix concerns the fact it does not take into account forces external to a market that can drive a market regardless. It was Michael Porter who in the early 80s developed a model to take into account that such strategies as "down-sizing, re-engineering, etc." can and often should be implemented to help a company grow in profits (p. 2). Porter's model is called the Five Forces Model, or P5F, and was designed to "help enterprises realize the impact of external scenarios (that he calls forces) on their overall performance" (p. 2). Seeing the "external forces" would also better help a business analyze both the competition within a market and its competitors, leading the business to develop a better growth strategy.

The P5F model relays five different "external forces": (1) the difficulty of entering a new market; (2) the competitors within a market; (3) the fact that customers and other buyers "establish price and product/service expectations"; (4) the fact that suppliers strongly influence "company performance"; and (5) the fact that "substitute" products "of better quality and lower prices" can "flood the market" (p. 3).

Hence, those who criticize the Ansoff Matrix may do so on the basis that the model is too simplistic because it does not take into account all of the factors that influence a market.

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