Category: Strategy Frameworks

WHAT IS IT?

Ansoff matrix, also called product/market expansion grid, is a marketing planning model that helps a business determine its product and market strategy. It serves as a tool to device revenue growth strategies and analyzes the risks associated with these strategies.

Ansoff matrix shows four business strategies that firms can use:
• Market Penetration – Focuses on increasing the market share of existing products in existing markets. Again, this is the least risky among the four strategies.
• Product Development – Focuses on introducing new products in existing markets
• Market Development – Focuses on developing new markets for existing products
• Diversification – Focuses on entering new markets with new products. The riskiest among the four strategies.

WHY DO IT?

Ansoff’s product/market growth matrix offers four strategies you can use to grow your business. These strategies are often called “strategies for diversification.” Ansoff matrix also helps you identify the risks associated with each of the strategies. The idea is that each time you move to a new quadrant, the risk associated with that strategy increases. For years now, the Ansoff matrix has served as a simple strategic framework for business leaders and marketers to evaluate risks associated with their business growth strategies.

HOW TO DO IT?

Step 1: Examine your options
Let’s take Coca-Cola as an example to examine different strategies.

Market Penetration: In this quadrant, you are trying to sell more of your existing products to your current customers. This could be achieved using promotions through discounts or loyalty programs. For example, for Coca-Cola, this could mean a holiday special edition of coke promoted through topical ads.

Product Development: Here, you are trying to sell new products to your existing customers. These new products also could be variants of your existing products or repackaged products. A good example of this would be various flavours that Coca-Cola launched over the years, including Cherry Coke and orange vanilla.

Market Development: Market development entails targeting new markets or new areas of existing markets. That is, you are trying to sell more of your existing products to different customers. For example, you may target different geographical markets, different marketing channels, or different demographics to achieve this. Coca-Cola launching Coke Zero to cater to the male demographic, alongside the already existing Diet Coke, which serves the female demographic, is a classic example of market development.

Diversification: In this quadrant, you are trying to sell completely different products to different customers. Diversification can be related to – production of a new category of goods that complements your product portfolio or can be unrelated – entry into a different industry altogether. For example, Coca-Cola acquiring Glaceau, a vitamin water brand, can be considered related diversification. And Coke’s official merchandise, including glasses and T-shirts, can be viewed as unrelated diversification.

Step 2: Analyse risks
Conduct risk analysis on the different strategies offered by the Ansoff model and prioritize the options based on the risk impact. It is important to identify which strategies can be implemented in the short term and saved for later, based on the risks associated with them.

Step 3: Choose the best option for implementation
After a thorough evaluation of each of the strategies, you will be fully equipped to choose the best strategy for your company’s growth. Decision matrix analysis might be useful in evaluating the strategies and determining the best choice for implementation.

Lastly, please note that even though we mentioned products in this article, the same strategies apply to services. So you are all set now to embark upon your business growth journey!

Most business owners are focused on building a business and not a brand. This myopic view of selling products/services and making profits rather than building a strong brand will lead to an inevitable exit. The products/services that a business offers are only relevant till there are better substitutes in the market. And in the current competitive world, there are new and improved products hitting the market every couple of years.

On the other hand, brands are more resilient to short-term market changes and stand the test of time. In a report published by the Bank of Korea that looked at 41 countries, there were 5,586 companies older than two centuries. Moreover, your brand identity will serve as your key competitive advantage. Focusing your efforts on increasing brand awareness can help the target users recall your brand, leading to the purchase of your products/services. In addition, your brand will add intangible value to your business with the reputation, feel and experience that the customers associate with it.

So, how do you build a solid online brand presence? Below are a few tips that can help you systemically approach this process:
• Identify your business goals and strategize your brand positioning
• Personify your brand
• Build a captivating website
• Create value-adding, high-quality content consistently
• Take advantage of infographics and video content for visual storytelling
• Demonstrate your expertise or unique offering(s) through your content
• Devise a solid social media strategy
• Use different social media tools to achieve specific actions from your customers
• Be responsive online and show up on forums where your audience is present
• Optimize your site for search engines using SEO techniques
• Encourage customers to write online reviews
• Include paid advertising as a part of your marketing strategy
• Ask for signups on your site and build an email list
• Experiment with referral programs and influencer marketing
• Analyze the results from your online marketing efforts to optimize them regularly

What are some steps you have taken to boost your brand awareness? Let us know in the comments below.

BCG Matrix

WHAT IS IT?
Boston Consulting Group’s growth-share matrix, popularly known as BCG matrix, is designed to help companies in portfolio management. This four-celled matrix helps companies prioritize their different businesses as a function of market share and market potential. The matrix is divided into four quadrants based on each portfolio’s market growth and relative market share, as shown in the figure.
Dogs: Products with low growth and market share
Question marks (problem child): Products in high growth markets with low market share
Stars: Products in high growth markets with high market share
Cash cows: Products in low growth markets with low market share

WHY DO IT?

BCG matrix serves as a strategic management tool that is highly relevant to larger businesses with multiple products or services. However, smaller businesses can still use BCG analysis to explore the potential of new products and to provide an overview of all their products. If the market share is small, you may base the ‘Market share’ axis on your competitors rather than the entire market.
The BCG portfolio matrix uses the logic that market leadership results in sustainable superior returns. The market leader ultimately obtains a cost advantage that sets them apart from their competition. Thus, high growth rates examined in the BCG growth-share matrix can signal which markets have the most growth potential for decision-makers to manage the product portfolios.

HOW TO DO IT?

Step 1: Identify the products or services you would like to analyze using the BCG growth matrix strategic framework.
Let’s take Google as an example for our analysis. Google has many products in their product portfolio beyond their dominant search engine, including web-based tools, advertising tools, developer tools, operating systems, mobile and desktop applications, hardware, and other assisting services.

Step 2: Analyse the expected growth rate and the relative market share to fill in the BCG matrix.
Let’s inspect each quadrant of the BCG matrix for Google’s products and services
Cash cows: Google’s advertising business is a revenue cash cow. Google’s search engine and Android OS have a high market share, but there is little scope for further market growth. Therefore, we can categorize them as Cash cows.
Stars: Stars are fast-growing market leaders who have the highest profit potential. Apps like Google Maps, YouTube, and Google assistant (for mobiles and home automation systems) are some of the stars generating large profits and demanding huge investments from Google.
Question mark products: Google Drive and Docs are examples of question mark products. There is a high market growth potential for these products, but the scope to generate profits is low due to the higher market share of their competitors.
Dog products: Hardware products like Google glass and social networking sites like Google Plus can be labelled as dog products, as they have less market growth and low market share.

Step 3: Understand the potential for each of your products and evaluate them objectively to make investment decisions. Based on the results from your BCG matrix, you can make the following decisions:
• Build – Increase investment in a product to increase its market share (e.g., Push a product in question mark quadrant to star quadrant)
• Hold – Stop investing in a product if you cannot afford further investment (e.g., Products in any of the four quadrants)
• Harvest – Decrease the investment in a product with low market growth potential (e.g., Products in the cash cow quadrant)
• Divest – Divert the investment to other products from a product that is not profitable (e.g., Terminating products in dog quadrant)

The BCG model can also be applied to areas other than product portfolio strategy. For instance, it can be applied to plan investments in marketing channels to divest the dogs or invest in the stars.

How does the BCG matrix apply to your product portfolio? Let us know in the comments below.