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ACCA Strategic Professional · Strategic Business Leader · Strategic choices

Brightwell Retail, a high street clothing chain, is considering buying a fabric mill that supplies it. A director says this is 'diversification' under Ansoff's Matrix. What is the most accurate response?

The director's label is only partly right. Ansoff's Matrix classifies growth by product and market, so buying a supplier is mainly vertical integration. It becomes diversification only if the mill sells new products to new external customers.

  1. AAnsoff's Matrix addresses product-market scope, so backward vertical integration is better analysed as a method or direction of growth, not a quadrant, unless the mill sells new products to new marketsCorrect
  2. BIt is market development because the mill is a new location
  3. CIt is product development because the mill makes a new product
  4. DIt is market penetration because Brightwell is increasing its control of its existing market

Explanation

Ansoff classifies by products and markets. Buying a supplier mainly serving the firm's own needs is vertical integration, a different dimension. It would be diversification only if the mill sells new products to new external markets. The other options wrongly force a quadrant.

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