Many small businesses struggle with growth. Usually they lack a structured way of pursuing growth opportunities. When I was doing my MBA several years ago I came across a common framework which business owners can use to assess the business opportunities before them.
This framework is commonly referred to as the Ansoff Matrix. The matrix was developed by applied mathematician and business manager H, Igor Ansoff and was published in the Harvard Business Review in 1957. The four strategies of the Ansoff Matrix are:
1. Market Penetration: This strategy focuses on increasing sales of existing products to an existing market. Basically you try to increase your share of an existing market. It may mean increased promotion and distribution efforts. It could also involve reducing prices to increase sales. I have seen banks try to sell discounted loans to existing customers. This is the least risky of all strategies and should be explored first.
2. Product Development: This strategy focuses on introducing new products to an existing market. Many companies around town use this approach. We see different telecom companies coming up with different product offerings all the time. A good example in mobile money which was marketed primarily to existing mobile phone owners. You need a creative and innovative team to come up with new products.
3. Market Development: This strategy focuses on entering a new market using existing products. Basically you open shop in new territory. So if you have a supermarket in Kampala, you open up another one in Jinja. We see banks doing this as they open up new branches in different districts. You will to build an effective sales and marketing team to pull this off.
4. Diversification: This strategy focuses on entering a new market with the introduction of new products. It this case you offer new products to entirely new markets. A good example is Sudhir’s Ruparelia group which has businesses in different markets including horticulture, real estate, insurance, hotels, education, entertainment, etc. You could start with say a supermarket, then open up a petrol station, then start a school, etc. This is the most risky of all strategies and you need a good managerial team on board.
PS. We shall be holding our third Money Talk focusing on Financing Small Business this Friday 13th December 2019 from 6.00PM to 8.00PM. The Money Talk will be held at The Office Hive on 7th floor, the Cube, Kisementi, Cooper Road. Our guest speaker is Brian Amanyire who is a seasoned banker and finance professional. Brian was recently awarded the young CFO of the year award by the ACCA. For registration contact us on 0788 – 437543.