Growth Strategy - Are Your Business Ansoff Ready



After conducting a research into Marketing practices and its applications we have discovered the great thinkers of our times who pinned on paper in books and rightly so put their names to it as they breeze and lives marketing just like us at Girlfridayz all these wonderful ever so true and useful strategical strategies and tactics casually used in businesses which are in the know or think they know as marketing is a science.

This introductory article discusses the origins of strategic management dated back since the 50's and 60's by great thinkers and the need to recognised their efforts and contributions to what is known as Marketing before we introduce Ansoff Matrix.

The History of Marketing

Strategic management discipline and practice originated in the 50s and 60s many people contributed to the development but the most influential were Peter Drucker, Philip Selznick, Alfred Chandler, Igor Ansoff and Bruce Henderson. The discipline draws from earlier thinking and texts on ‘strategy’ dating back thousands of years.

The direction of strategic research also paralleled a major paradigm shift in how companies competed, specifically a shift from the production focus to market focus. The prevailing concept in strategy up to the 1950s was to create a product of high technical quality. If you created a product that worked well and was durable, it was assumed you would have no difficulty profiting.

This was called the production orientation. Henry Ford famously said of the Model T car: "Any customer can have a car painted any colour that he wants, so long as it is black." Many companies built strategic planning function to develop and execute the formulation and implantation processes during the 60s.

Peter Drucker was a prolific management theorist and author of dozens of management books with career spanning five decades. He addressed fundamental strategic questions in 1954 book The Practice of Management writing “…the first responsibility of top management is to ask the question ‘what our business is?’ and to make sure it is carefully studied and correctly answered.” He wrote that the answer was determined by the customer.

He recommended eight areas where objectives should be set, such as market standing, innovation, productivity, physical and financial resources, worker performances and attitude, profitability, manager performance including development, and public responsibility.

He further stated that it was the customer who defined what business the organization was in. In 1960 Theodore Levitt argued that instead of producing products then trying to sell them to the customer, businesses should start with the customer, find out what they wanted, and then produce it for them. The fallacy of the production orientation was also referred to as marketing myopia in an article of the same name by Levitt.

In 57, Philip Selznick initially used the term “distinctive competence” in referring to how the Navy was attempting to differentiate itself from other services. He also formalised the concept of matching the organisation’s internal factors with external environmental circumstances.

His core concept was further developed by Kenneth R Andrews in 63 into what we now call SWOT analysis, which look at the strengths, weaknesses of the business are assessed considering opportunities and threats in the business environment.

Alfred Chandler recognised the importance of coordinating the management of activities under an all-encompassing strategy. Interactions between functions were typically handled by managers who relayed information back and forth between departments.

Chandler stressed the importance of taking a long-term perspective when looking to the future. In 1962 he developed a ground-breaking work strategy and structure and showed that long-term coordinated strategy was necessary to give a company structure, direction and focus.

He famously wrote “structure follows strategy” and “strategy is the determination of the basic long-term goals of an enterprise, and the adoption of a course of action and the allocation of resources necessary for carrying out these goals”.

Igor Ansoff built on Chandler’s work by adding concept and inventing a vocabulary. He developed a grid that compared strategies for market penetration, product development, market development, horizontal, vertical integration and diversification.

He felt that management could use the grid to systematically prepare for the future. In 1965 he developed the classic Corporate Strategy and develop gap analysis to clarify the gap between the current reality and the goals calling it “gap reducing actions” added that strategic management had three parts comprises of strategic planning, the skill of a firm in converting its plans into reality and the skill of a firm in managing its own internal resistance to change.

Bruce Henderson, founder of the Boston Consulting Group, wrote about the concept of the experience curve in 1968, following initial work begun in 1965. The experience curve refers to a hypothesis that unit production costs decline by 20–30% every time cumulative production doubles. This supported the argument for achieving higher market share and economies of scale.

Over time, the customer became the driving force behind all strategic business decisions. This marketing concept, in the decades since its introduction, has been reformulated and repackaged under names including market orientation, customer orientation, customer intimacy, customer focus, customer-driven and market focus.


The Ansoff Matrix

Ansoff matrix product/market growth matrix suggest that a business attempt to grow depend on whether its markets lays in existing products or in a new products or in a new market or existing markets. The output from Ansoff product/market matrix is a series of suggested growth strategies which set the direction for the business strategy which criterions are Market Penetration, Market development, Product development, Diversification.

Market Penetration

It is the name given to growth strategies where the business focus on selling products in existing markets. Market penetration has 7 objectives which are details below:

  • To Maintain market share

  • Increase market share of current products

  • Competitive price strategy

  • Advertising sales, promotion and more resources dedicated to personal selling

It's also includes:

  • Secure dominance of growth markets

  • Restructure of mature market by driving out competitors — this would require a much more aggressive promotional campaign, supported by pricing strategy design to make the market unattractive for competitors

  • Increase in customers usage by existing customers : ie:- Loyalty card scheme basically manipulating the market with tactics which works.

Market development

It is the name given to growth strategy where the business seek to sell it existing product into a new market. There are many possibilities in approaching this strategy.

  • New geographical market ie:- exporting the product to a new country, new product dimensions or packaging

  • New distribution channels ie:- retails, brick and mortar business to e-commerce, mail order, private selling, garage sales etc

  • Different pricing policy to attract different customers or create a new market segment

Market development is consider a more risky strategy than market penetration due to targeting new markets.

Product Development

Product development refers to a growth strategy where the business aims to introduce news products into existing markets. This strategy may require the development of new competencies and require the business to develop, modified products which can appeal to existing markets.

A strategy of product development is particular for businesses where the product needs to be differentiated in order to remain competitive. A successful product development strategy places the marketing focus on research, development, and innovation with detailed insight in customers needs and how to be the one who is first to change the market.

Diversification

Diversification is the name given to the growth strategy where a business markets new products in new markets. This is an inherently more risky strategy, therefore, it must have a clear idea about what it expected to gain from the strategy and an honest assessment of the risks. However, diversification can be highly rewarding.

The latter are an explanation of the Ansoff matrix the holy grail of growth strategy and should be used in your business to drive growth and profitability over times if you apply relentless consistency in what you do best and provide a quality customers focus services and products to your customers existing and new customers, applying the same principal of care, support and value for your customers with solutions oriented to solve their needs you will grow and prosper.

Customer Perception

Customers are the driver of your business and without customers you do not have a business and bare in mind that customer build your business but also can kill your business. In marketing perception is important depending on how the customers perceive your business it can grow and be profitable.

If you unfocus and lazy you will not achieved much and if you lack of drive and belief in these strategic management strategy that they work you will not growth either because to pull these strategies to work to your advantage it requires a positive mind, the ability to take positive risks, to conduct research into the market, to segment your market and find a niche where you can thrive and to ensure that you treat your customer with value, addressing their needs by providing solution and apply the marketing tactic relentlessly to remain relevant set long-term goal for the future and reviews your plans regularly.

If you do not have a plan you plan to fails hence ensure that the foundations and process have weight so they can carry you to profitability and business sustainability through time.

Girlfridayz can support you with business plan, marketing plan and more. We can update your business, marketing plan for you, so you have more times to do what you do best.

If you like this article, feel free to share it with your peers, business associate or anyone who benefit from these growth strategy.

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