This matrix was developed by Igor Ansoff in 1957 to give business strategic business options they can chose from in order to plan their growth and meet specific objectives. It takes into account existing markets and new markets and existing products and new products for business growth and development.

When a business intends to achieve growth strategies, the Ansoffs Matrix is a valuable market auditing and planning tool. It provides the basis for an organization to set objectives and can be used alongside other models. There are risks associates with each strategy in the quadrant and these can all be now weighed in the decision-making process.

(1) Business Growth with Existing Products in Existing Markets. The approach here is Market Penetration. In this situation the business will face the full challenges of market competition. Penetration pricing and brand loyalty are examples of how this can be achieved. The market penetration strategy is the least risky. Extension strategies are often used to prolong the maturity stage of the Product Life Cycle, such as new ad campaigns, packaging, flavours, sizes, reward programs, etc.

(2) Business Growth with Existing Products in New Markets. This approach is Market Development. With the phenomena of Globalization, many companies have decided to take their products to new markets such as China. This expansion creates unique opportunities and challenges, but typically has more risk than a market penetration strategy. Amazon growth in India

(3) Business Growth with New Products in Existing Markets. This approach is Product Development. A business may improve through innovation and creativity in creating more products that generate market sales. Consider Apple Computers and what it does in the development of new products such as the ipod and ipad. Similar to market development, product development carries more risk than market penetration.

(4) Business Growth with New Products in New Markets. This approach is Diversification. This is when a business moves away from its core activities to providing services or products that are in a different sector, for example Phillip Morris not only makes Cigarettes but has gone on to acquire Kraft foods which makes chocolate among other things. Also called the “suicide cell” strategy carries the most risky because it calls for a company operating outside of its core competencies of the firm in an unknown market.