Reading: Strategic Opportunity Matrix
The final strategic framework we will explore is the Strategic Opportunity Matrix, also known as the Ansoff Matrix, named after its creator, Igor Ansoff. While a SWOT analysis helps identify opportunities in general, such as new markets or product ideas, the Strategic Opportunity Matrix specifically outlines four growth strategies based on combinations of new and existing markets and products.
The Strategic Opportunity Matrix helps organizations evaluate how to grow by asking two key questions:
- Should we focus on existing or new markets?
- Should we offer existing or new products?
By examining these dimensions, the matrix provides a structured way to assess potential growth paths and the risks associated with each.
Each quadrant of the Strategic Opportunity Matrix represents a different growth strategy:
- Market penetration: focus on current products and current markets with the goal of increasing market share
- Market development: use existing products to capture new markets
- Product development: create new products that can be sold in existing markets
- Diversification: create completely new opportunities by developing new products that will be introduced in new markets
Each strategy entails a different level of risk. Market penetration has the lowest risk since it emphasizes known markets and existing products. Diversification has the highest risk because it involves the development of new products and taking them to new markets. The company must consider whether it can achieve the desired returns without risking a move into new markets or introducing new products. Often, though, higher risk leads to a higher return.
Which strategy should the company pursue? The answer can be informed by a SWOT analysis, which takes into account the strengths and weakness of a company’s existing products, as well as the opportunities and threats in the competitive market.
Creation note: This content was edited with the assistance of ChatGPT, a language model developed by OpenAI, and was subsequently reviewed and edited by the author for clarity and accuracy.
