ACCA Strategic Professional · Strategic Business Leader · Strategic choices

Brightwater Utilities, a regulated water company with stable but capped returns, is considering buying a chain of fitness clubs, a business unrelated to its existing operations, purely because the fitness sector is growing fast. Which is the most valid criticism using Ansoff's matrix?

The move is unrelated diversification, the riskiest Ansoff quadrant, with new products in new markets. The criticism is that sector growth alone is weak justification when Brightwater has no relevant competences or synergies, so success depends on skills it does not have.

1. AIt is market penetration and will cannibalise existing water sales
2. BIt is diversification, the riskiest quadrant, and the stated rationale ignores the lack of relevant competences and synergiesCorrect
3. CIt is product development and so depends on existing customers
4. DIt is market development and so only needs new distribution channels