When it comes to defining business growth strategies, many managers and entrepreneurs focus their attention on new performance indicators. Others think that they should use CRM techniques to gain and retain customers. Finally, there are those who can’t find a clear solution; then they start a series of brainstorming meetings looking for a magic formula for growth.
The answer may be right in front of them if they make use of a well-established decision-making tool for developing business growth strategies that were created in 1965, and used to this day by Professor Igor Ansoff.
Here’s how to redesign your business processes based on new business growth strategies using Ansoff’s product and market matrix.
Check out: 5 business process simplification ideas
How to Analyze Products and the Market to Determine Business Growth Strategies
For a company to grow, it needs to conquer new markets or expand its existing share in them.
And of course, designing and automating new production flows, expanding or purchasing plant and machinery, determining new KPIs, enhancing CRMs, and other measures may be necessary to meet the new demand.
But these activities can only be determined after defining which business growth strategies will be adopted.
With this in mind, Professor Igor Ansoff, who has worked as a consultant for companies such as Philips, GE, and IBM, developed the matrix that bears his name and is also known as the Product-Market Growth Matrix.
By using it, it’s possible to define 4 basic business growth strategies:
- Market Penetration: Selling more current products or services in a market that the business is already operating in.
- Product Development: Selling new products in markets that the business is already operating in.
- Development or Market Expansion: Selling current products or services in new markets
- Diversification: The development of new products for new markets
This type of decision-making should involve the analysis of opportunities, threats and target markets, with the help of the SWOT matrix, as well as the analysis of competitive forces, idealized by Porter.
But in this article, let’s focus our attention on the Ansoff matrix.
Here is a visual example of the matrix:
This business growth strategy should be used when the company feels that the quality, brand strength, distribution or another aspect of its product or service may be sufficient enough to gain market share from its current competitors without making changes to products and marketing and communication plans, among other things.
In this business growth strategy, the focus is on product development, emphasizing that the strength of a companies brand can be transmitted on to other products than those already marketed. A company tries to expand its line and offer new products to the same consumers, in the same market where it’s already operating.
For example, a company that sells soap can start by selling shampoos to the same market, and then perfumes and other toiletries.
Developing a new market is a business growth strategy in which a company tries to launch its current products into other markets.
For example, the soap company above operates in only two states, so it begins trying to operate in a few more by expanding its distribution network, or it begins exporting its product to other countries, or just simply tries to reach other age groups (as long as it doesn’t have to modify any feature of the product).
Diversification occurs when a company tries to grow by creating a new product for a new market. Let’s say, our soap company is consolidated in the adult soap market, but it now wants to sell in the children’s product market or the infant market.
It’ll be necessary to not only change some part of the product, aroma, fragrances, etc but also the packaging, names and other characteristics to be able to grow this new product in the new market.
To promote a company’s growth strategies, adapt to new markets and develop new products, it’s very likely that your organization will have to use a BPM tool to optimize or create new processes, heck out HEFLO!