Igor Ansoff proposed a simple matrix (grid) based on two of the most obvious levers of strategy deployment – products and markets. The matrix brings clarity to the context of strategy in the business – products and markets. A strategy typically results in business outcomes for a company through its influence on the products or services that the company provides and the targeted markets. Even after four decades the grid is used to understand the options available for growth through creating new opportunities in the existing business i.e. intensification. The beauty of the Ansoff’s grid or matrix is the simplicity with which it creates a context for growth strategies and provokes strategic thinking.

The grid is built on the premise that to pursue a growth strategy, typically a company must identify the markets and products, it needs to concentrate on and may select to compete in current or new markets through existing or new products.

Market penetration
Market penetration is competing in existing markets through existing products. The risk involved is minimum but to succeed in penetrating existing markets entails gaining market share from that of the competitors. To capture market share of competitors requires capability to constantly reduce the costs and still be able to differentiate the products and services subtly by improving upon the offerings. Enhanced value proposition at lower costs is the best and surest means of market penetration. It is extremely important for companies that choose market penetration as a means of growth to rightly identify the value drivers for existing market segments and serve the value right and at the same time keeping the costs low through slicing the features that customers are not important for the customers. Wal-Mart pursues this strategy so well. Wal-Mart understands the value proposition of its customers of correct labeling, quick check out and car parking facilities and more importantly attracts more and more customers by providing lowest prices through leveraging economies of scale by improving operational efficiencies.

Market development
Market development is the strategy by which companies try to capture new markets with their existing range of products. What is important for companies wishing to pursue market development is to leverage their reputation and build new market segments by careful customer education and communication. Foray of Japanese, European and American auto industry into China and India during the last decade is a good example of market development. What one saw in this part of the world was players like Ford, Honda, Toyota etc. trying to en-cash their reputation in well established western markets to gain early footage in the new and rapidly developing markets. New markets do not only mean new geographical markets, they can also mean moving over to all-together a new segment of customers or industries. For example, corrosion resistant steel generally used in high strength construction being promoted for use in marine applications is a case of market development. So the challenge for a company is to identify new geographical markets or new applications of the existing products, so that new segment of customers can be targeted.

Product development
Product development strategy is pursued by companies whose existing markets are saturated and companies try to leverage their knowledge and relationships with existing customers to design and push new products. Of late, the spate of new product development was seen in banking companies in India, when the banks offered credit cards facility to their existing customers, by which the companies saw their top lines growing. Product development strategy entails comprehensive and fine understanding of customers’ future needs and expectations and introduction of products, which are perceived superior alternative to the offerings of competitors. Product development strategy is a means of moving away from competition and creating uncontested market space. Companies that have product development at the core of their business models must have an innovative outlook to identify the emerging opportunities and be the first to market. Investment in R&D, advertisement and focus on time to market are of prime importance.

Diversification
Diversification strategy is entering new markets with a new range of products. Diversification can be related or un-related. Un-related diversification can be more riskier as was the case with Sony, when it decided to enter entertainment content business, which is diversification from their traditional strength of consumer electronics. Companies must carefully and deliberately build unique competencies, which they can leverage upon and create or enter new markets. A classic example of Honda, leveraging upon its core competency of engines to enter the business of generators and lawn mowers has been immortalized by Gary Hamel and C.K. Prahlad, in their landmark book competing for the future.