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ACCA Strategic Professional · Strategic Business Leader · Concepts of strategy

Halden Steel has been growing by selling its existing steel products into existing markets, and now wishes to move into new European markets using its current products, while keeping its present technology. The board maps this with Ansoff's matrix, and a director warns that, unlike its present approach, the new move brings extra uncertainty from unfamiliar customers and regulation but not from product risk. Which strategic direction is Halden pursuing, and what does the framework imply?

Halden is pursuing market development, selling existing products in new markets. Ansoff's matrix implies moderate risk, higher than market penetration because markets are unfamiliar, but lower than diversification, where both product and market are new. Product risk is absent since the products are unchanged.

  1. AMarket development; risk is higher than market penetration but lower than diversificationCorrect
  2. BProduct development; risk is the same as market penetration because customers are known
  3. CDiversification; risk is the highest because both product and market are new
  4. DMarket penetration; risk is lowest because share is gained in existing markets

Explanation

Existing products sold into new markets is market development. In Ansoff's matrix risk rises from penetration (lowest) to market or product development (moderate) to diversification (highest). Diversification would need new products too, and penetration stays in existing markets.

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