Management model: Ansoff's product/ market grid

Today i will discuss about an essential business model,Ansoff's product/ market grid, it is a very essential model every aspiring entrepreneur and growing business owners should know.

               The ansoff product/market grid offer a logical way of determining the scope and direction of a firm's strategic development in the market place. the firm;s strategic development consists of two related types of strategy: portfolio strategy and competitive strategy. the portfolio strategy specifies the objectives for each of the firms product/ market combinations. it points the dots on the horizon . the competitive strategy specifies the route to reach those objectives. In the Ansoff product/ market grid setting the objectives (portfolio strategy) was introduced as choosing a growth vector, specifying the ultimate future scope of business. the growth vector is expressed on two dimensions: product and markets.

  Later, ansoff introduced the geographical growth vector, replacing the growth vector from his product/marketgrid. the geographical growth  has three dimensions, which the firm can use to define its furture business scope:

1. the market need( such as need for personal transportaton or need for amplification of electric signals.
2. the product/service technology ( such as integrated circuit technology)
3. the market geography

   

   Ansoff's growth vector components products and markets

   
   

deciding a direction and a strategy for corporate growth depends upon a number of factors, including: the level of risk involved , the current set of products and markets, and whether the organization wants to develop new or existing products or markets. in order to plan gor the fuure in a systematic way, it is vital that managers understand the gap between the firm's current and desired position. the ansoff product/market grid and the ansoff cube can be used as a framework to idnetify the direction and oppurtunities  for corporate growth.
   Ansoff introduced four components that cover the portfolio strategy and help specify the desired future business scope.

• geographical growth vecotr
• competitve advantage
• synergies
• strategic flexibility

the geographical growth vector can be determined with ansoff's cube, by connecting the current scope of business with the desired future business scope

the four components are interlinked. Optimizing one of the components is likely to depress the firms performance on the others. in particular, maximizing synergies is very likely to reduce flexibility. the process of selecting and balancing the strategic objectives is a complex matter

How to use it:

to use the product/ market grid in practice, an organization mus first assess its existing product-market combinations and corresponding levels of competitve advantage. then, its desired future business scope is to be chosen as the geographical growth vecotr within the Ansoff cube.

   Next, the feasability of the chosen scope and direction should then assessed wih an analysis of the combination of the intended direction and extent of corporate growth and the firm's distinctive competitive advantages( core competencies). not only should there be the means that enable the chosen scope, those means should also provide the firm with a sustainable competitve advanatage.