What is business growth strategy?
In this blog post I am going to be talking about IGOR ANSOFF’S business growth model and his 4 variables to explain the business growth strategy….
ABOUT IGOR ANSOFF
Before getting into the 4 variables developed by IGOR ANSOFF… lets get into a brief on who IGOR ANSOFF is… so this will help us to understand the IGOR ANSOFF’s business growth model itself…
if you want to understand the creation… you need to understand the creator also…
Igor was born in russia… his father Ansoff senior had a american origin and his mother is from russia who had a capitalist background. Igor’s maternal grandfather had a tiny samovar factorY in a place called tula some hundred miles from the south of moscow.
Because of this the ansoff’s were assumed to be part of a group which had counter revolultionary aspirations.
This led Igor Ansoff not to trust any system that claimed to be too perfect.
He says that this spirit “expressed itself through my inability to join other ‘systems’ in which I lived, studied, and worked. It reinforced my drive to excel in order to force the system to recognize and reward me. And perversely, it also drove me to excel through making innovative contributions which challenged the systems cultures.”
later on the ansoff’s moved to US after facing many hardships and igor ansoff completed his studies with the help of a russian orthodox priest and scholarships which came his way.
he went on to study engineering but abandoned it because he did not want to practice engineering. Seeking broader perspective he went on to get a master’s degree in modern physics and later on he went to Brown University to get a doctorate degree in applied mathematics.
YOU KNOW WHAT!!!!
His formal education was completed when he was 30 years old.
He joined UCLA in the senior executive program after World War II, where he served as a liaison with Russia and an instructor of physics at the United States Navy.
Later on igor ansoff was offered a job in the RAND Corporation’s Mathematics Department. He moved laterally within RAND and became a project manager in the large-scale projects focused on making recommendations to the U.S. Air Force on technology and weapon systems acquisition. The second major study he did at RAND addressed the vulnerability of NATO Air Forces–
The inclusion of “soft metrics” which he pointed out was ignored by people at RAND and by airforce officials. Igor learned his first lesson in organizational myopia from this incident that became one of his primary focus of study 20 years later.
Igor left RAND in 1957 and went to work for Lockheed Aircraft.
He was Vice President of Planning and Director of Diversification. During his time at Lockheed, he learned how to deal with environmental changes that affect organizations. This became his primary focus for the rest of his career.
One morning while shaving, Igor realized that he had no idea of what he wanted to do with the rest of his life. While on vacation in a place called Cape Cod, he developed a long-term plan to take early retirement from Lockheed and find a job at a school of management. Within one year, he was approached by The Graduate School of Industrial Administration at the Carnegie Mellon University about joining their faculty team. When he entered GSIA, they allowed him one year free from teaching so that he could work on finishing his book Corporate Strategy which was published in 1965 and became an instant success. He served as Professor of Industrial Administration in the Graduate School at Carnegie Mellon University from 1963 until 1968.
In 1969, he became the Dean of the new Owen Graduate School of Management at Vanderbilt University in Nashville, Tennessee. He accepted this position with the condition that the school would specialize in educating change agents which was badly needed in industry and not but not produced by any U.S. school of business at that time.
In 1983 he joined the U.S. International University (USIU, now Alliant International University) where he created the school’s strategic management program.
Professionally, he is known worldwide for his research in The concept of environmental turbulence, the contingent strategic success paradigm and real time strategic management.
Marketing and MBA students are usually familiar with his Ansoff Matrix, a tool he created to plot generic strategies for growing a business, via existing or new products, in existing or new markets.
Now ansoff matrix serves as a guiding tool to the businesses which wanted to grow… after doing lot of research… ansoff concluded that there are only four ways an organization or a business would grow….
Lets get to the ansoff matrix now…
These four growth strategies were identified by Ansoff using a 2×2 matrix and were made up of new or existing products on x axis and new and existing markets on the y axis. The Ansoff matrix is a tool that can help you grow your company. It is simple, but effective.
Now let is us look at the first box which is market penetration and where you get to sell your existing products in the existing markets. Now market penetration can be defined in two ways. One as an activity and the other as a measurement.
The measurement angle is about how many total potential prospects are there in your market and how many of them are your customers. For example… if your market is India and you have 100 potential customers for your product… your current customer base is 10… you can plan to add 30 more customers by acquiring them…
The second measurement angle is about market penetration as an activity and it comes from ansoff’s matrix…
Now in this activity angle… you take your existing product to an existing market where other similar products are already being sold by the competitors and you take market share from the competing companies…
The best example for this can be the war between two cola giants… coca cola eating into the market share of pepsi can be the perfect example of marketing penetration strategy from the activity angle…
Now if you are looking to penetrate your market at the most economical budget… email marketing automation is the way to go… check the video description for more details…
The second business growth strategy is product development…
This is a strategy where your company plans and develops new products, or upgrades current products, and introduces them to an existing market.
A successful product development strategy includes doing in depth consumer research, brainstorming, building, testing, launching, and marketing it to the existing market.
The best example for the product development strategy would be a cement manufacturer coming out with a water proof paint or a weather protection cement to serve his existing market…
The third business growth strategy is market development strategy..
Looking at this image, we see that market development strategy is a business growth strategy that involves adding existing products to new markets. In other words, a market development strategy helps businesses in growth phase identify and develop new opportunities to sell their current line of products in the markets which they have not explored yet.
So if you are selling a HRMS software specialized for manufacturers and you are planning to sell that software in Africa which is an unexplored market… then it is market development strategy…
You can actually create demand and test waters in the new markets which you want to enter through the email marketing automation and also do consumer research through surveys using email marketing automation without you having to move out of your office…
The fourth business growth strategy is diversification…
Diversification is all about adding new products in the new markets…
Companies diversify to increase their revenue and profits. They do this by adding new products, services, or features to appeal to the customers in places they haven’t been exploring before.
In addition to better profitability, diversification is done for a variety of other reasons, such as avoiding industry downturns, improving brand image, and providing a company with a defence mechanism against strong competition.
So these are the four business growth strategies which was designed by Igor Ansoff as a result of vast research and consultation he did for multinational companies like Philips, General Electric, Gulf, IBM, Sterling Airlines and Westinghouse.
These business growth strategies can be applied to any type of businesses of any size.
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Now my question to you is… What is the business growth strategy you are planning to use for your business… Let me know in the comment section… I will see you in the next video…