Use the Ansoff matrix to classify growth strategies as market penetration, product development, market development or diversification, explain the risk of each, and evaluate which suits an organisation.
Each is in the Business glossary, with every other term in the subject.
A planning tool that classifies growth strategies by whether they involve existing or new products and existing or new markets, giving four strategies with different levels of risk.
A growth strategy in which a business sells new products in new markets; it is related when the new activity is linked to the existing business and unrelated when it is not.
A growth strategy in which a business sells its existing products in new markets, such as new geographical areas, new market segments or new distribution channels.
A growth strategy in which a business aims to increase sales of its existing products in its existing markets, usually by raising its market share.
A growth strategy in which a business sells new or modified products to its existing markets.
Describe the Ansoff matrix and its two dimensions, products and markets.
Explain the four growth strategies: market penetration, product development, market development and diversification.
Explain why the risk of a strategy increases as a business moves away from its existing products and markets.
Construct an Ansoff matrix and use it to classify the growth strategies of a real organisation.
Apply the Ansoff matrix to a growth decision, together with other tools such as SWOT analysis and decision trees.
Explain the advantages and limitations of the Ansoff matrix as a planning tool.
The Ansoff matrix is a planning tool that sets out the four basic ways a business can grow its sales: by selling more of what it already sells, by creating new products, by finding new markets, or by doing both at once. It helps managers compare growth options and, above all, see how much risk each one carries.
Every growth strategy is a response to change in markets and technology, and the riskier strategies in the matrix depend on creativity, because they need new products or new ways of reaching customers. Growth decisions also raise questions of sustainability, since expanding into new products and markets can increase a business’s use of resources as well as its profits.
33 exam-style questions on this subtopic, written in the style of the IB papers. The first has its markscheme open. Counted on
Te Ara E-Bikes
[1] Te Ara E-Bikes (TAE) is a sole trader business in Queenstown, New Zealand, owned by Huia Rangihuna. Huia opened TAE in 2019 with 30 electric bikes (e-bikes) after working for ten years as a mountain-bike guide. TAE’s customers are mainly international tourists who ride the lakeside and wine-region trails between October and April.
[2] TAE has four revenue streams. Most of its revenue comes from e-bike hire at NZ$95 per day. It also runs guided wine-trail tours, repairs and services bikes for local riders, and sells its used e-bikes at the end of each season. Huia leases a shop on the waterfront, insures the fleet and employs one full-time mechanic, Callum, on an annual salary. Tour guides are paid NZ$140 for each tour they lead, and the electricity used to charge the batteries rises with the number of hires.
[3] Between May and September, the winter ski season, TAE’s revenue falls by about 70 %. The shop lease, insurance and Callum’s salary must still be paid, and in 2025 TAE made a loss in four of the five winter months. Huia has used her personal savings to pay suppliers twice.
[4] Huia is considering a new revenue stream: hiring out ski and snowboard equipment from the shop during winter. Queenstown has several large ski-hire businesses close to the ski fields, but none on the waterfront. Callum says he could learn to service skis, and the shop has enough space. The equipment would cost NZ$85 000, which Huia would need to borrow. Her accountant, Annie Zhou, thinks Huia should instead offer winter discounts to local riders and keep the business “doing what it does best”.
Define the term revenue stream.
2 marks
The official deck for this part of the syllabus.
Define the term Ansoff matrix.
What are the two dimensions of the Ansoff matrix, and what two options does each have?
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Igor Ansoff, a Russian-American applied mathematician and management theorist, set out the matrix in a 1957 Harvard Business Review article on strategies for diversification. His starting point was that a business wishing to grow must make two choices: which products it will sell, and which markets it will sell them to. Each choice has two options, existing or new, which gives four combinations.
In the matrix, a market is a group of customers, which can be defined by geography (a new country or region), by segment (a new age group or income group) or by channel (selling online for the first time). A product is new when the business has not sold it before, even if other firms already sell something similar. What counts as “new” therefore always depends on the business doing the analysis.
YouTubeMarket penetration means selling more of the business’s existing products to its existing markets. The business grows by taking customers from rivals, persuading existing customers to buy more often, or attracting people in its current market who do not yet buy the product. The result is a higher market share in a market the business already knows.
Common methods of market penetration are:
Price reductions and promotions, such as penetration pricing, discounts and special offers.
More promotion, for example advertising aimed at people who do not yet buy, or reminders to lapsed customers.
Loyalty schemes that reward customers for buying more often.
More outlets or longer opening hours in the same market, so the product is easier to buy.
Encouraging new uses of the product, so each customer buys more of it.
Greggs, the UK bakery chain, grew mainly by market penetration in its home market: more shops (around 2,500 by 2024), longer opening hours to serve commuters and evening customers, and a loyalty app, Greggs Rewards, launched in 2014. Its sales revenue reached £2,151.2 million in 2025.
Sources: Greggs plc, Preliminary Results 2025 (March 2026); The Times (May 2024); The Telegraph (October 2016), via Wikipedia, fetched 2026.
Market penetration is the least risky strategy because the business already understands both its product and its customers. It knows how to make the product, what it costs, how customers respond to it and who the competitors are. It needs little new investment, and mistakes are cheap to correct. For these reasons, most businesses look first for penetration opportunities.
The strategy has limits. In a market that is no longer growing, extra sales must come from rivals, who are likely to respond with price cuts of their own, which can lead to a price war that reduces every firm’s profit. Once a business already has a large share, each further gain is harder and more expensive, and a very large share may attract the attention of competition authorities. Market penetration is therefore most attractive when the market is still growing or when the business’s share is small.
Product development means selling new products to the business’s existing markets. The new product may be a completely new invention, a new version of an existing product or a related product that the same customers will want. The business builds on its knowledge of its customers and the loyalty of its brand.
Product development usually depends on research and development and market research to find out what existing customers need. It is also one of the main extension strategies for a product in the maturity stage of the product life cycle: adding new versions, sizes or features renews customers’ interest. HEINEKEN’s alcohol-free lager, Heineken 0.0, is an example. It offers the same brand to beer drinkers for occasions when they choose not to drink alcohol, and it is now sold in 117 countries.
Sources: HEINEKEN N.V., “Low- & no-alcohol”, theheinekencompany.com, fetched 2026.
Product development carries more risk than market penetration because the product is unproven. Research and development is expensive and slow, and many new products fail after launch, even when customers know the brand. There is also a risk of cannibalisation: the new product may take sales from the business’s existing products rather than from rivals, so total sales grow less than expected. The risk is reduced by market research, test marketing in a small area before a full launch, and by developing products that build on skills the business already has.
Market development means selling the business’s existing products in new markets. The new market can be a new geographical area (another region or country), a new market segment (a new age group, gender or type of customer) or a new distribution channel (selling online for the first time, or to businesses as well as consumers).
Jollibee, the Philippine fast-food chain founded in 1978, has grown by market development. Its early moves abroad included the Middle East from 1985, where many overseas Filipino workers live, and it opened its first US restaurant in 1998. By 2024 it had about 100 outlets in North America and 200 in Vietnam. It sells largely the same menu as at home, so the product is proven, but each new country has new customers, competitors, laws and suppliers.
Sources: ABS-CBN News (2024); The Philippine Star (March and December 2024), via Wikipedia, fetched 2026.
In market development the product is already proven, so the main risks come from the new market. In a new country the business may misunderstand customers’ tastes, culture and buying habits, face unfamiliar laws and taxes, and need to build distribution and a brand from nothing. Local rivals already have customers and know the market. Adapting the marketing mix to local conditions, and entering through a joint venture or franchise with a local partner, reduces these risks but also reduces the business’s control and share of profit.
Market development is attractive when the home market is saturated, when the product has a clear advantage that travels well (a strong brand, a low cost or a unique design) and when the business has the finance and managers to run operations at a distance. Spreading sales over several markets can also reduce risk overall, because a recession or a new competitor in one market affects only part of the business.
Diversification means selling new products in new markets. It is the only strategy in the matrix in which both the product and the customers are unfamiliar to the business, so it carries the highest risk. Businesses diversify to find growth when their existing markets are mature, to spread risk across different industries, or to use spare resources such as cash, a brand or technology.
Related diversification means moving into products and markets that are connected to the existing business, through shared technology, skills, brand or customers. The links create synergy, so the new activity can use resources the business already has. Xiaomi, the Chinese smartphone maker, launched its first electric car, the SU7, in March 2024. It used its brand, its software and its experience of connected consumer electronics, and in 2025 its electric vehicle and AI segment delivered 411,082 vehicles, earned revenue of RMB106.1 billion and made its first annual operating profit.
Sources: CnEVPost (24 March 2026), reporting Xiaomi Corporation’s 2025 annual results.
Unrelated diversification means moving into products and markets with no link to the existing business. The new businesses may be grouped in a conglomerate, often through conglomerate integration (taking over firms in unrelated industries). The Virgin Group began as a record seller in 1970 and has since operated, often under licence of its brand, in airlines, rail, mobile phones, banking, gyms and space travel. Some ventures succeeded, while others, such as Virgin Cars and Virgin Orbit (bankrupt in 2023), failed.
Sources: Virgin Group, via Wikipedia, fetched 2026.
In diversification the business must learn a new product and a new market at the same time. It has no track record with the customers, may lack the technical knowledge to make the product well, and faces established rivals that know the market far better. Diversification usually needs large investment, often in the form of a takeover, and it can distract managers from the core business. Unrelated diversification has the fewest synergies and so offers the least protection against these risks.
Diversification can still be the right choice. A business whose core market is in long-term decline may have no other route to survival, and a successful diversification spreads risk because a downturn in one industry does not affect the others. The question is whether the business has the finance, skills and patience to succeed in an unfamiliar market.
The matrix shows risk in terms of the business’s knowledge. In the top-left cell the business knows both its product and its customers. Moving right means the business no longer knows whether the product works and whether customers want it. Moving down means it no longer knows the customers, the competitors or the rules of the market. In the bottom-right cell both uncertainties apply at once.
Higher risk does not mean a worse strategy. Riskier strategies often offer higher potential returns, because they open markets where there is more room to grow. A business with large cash reserves, experienced managers and a mature home market may rationally choose a riskier strategy, while a small business with weak cash flow may need the safety of market penetration. How much risk a business should accept depends on its objectives and resources, which the matrix does not show.
Strategy | What is new | Typical methods | Main risks | Most suitable when… |
|---|---|---|---|---|
Market penetration | Nothing | Price cuts, promotion, loyalty schemes, more outlets | Price wars; limited growth in a mature market | The market is growing or the business’s share is small |
Product development | The product | R&D, new versions, related products | High R&D cost; product failure; cannibalisation | The business has strong customer loyalty and R&D ability |
Market development | The market | New countries, segments or channels | Misreading customers and culture; unfamiliar laws and rivals | The home market is saturated and the product travels well |
Diversification | Product and market | New ventures, takeovers, joint ventures | Lack of knowledge and synergy; large investment | The core market is declining and the business has finance and skills |
The Ansoff matrix is used whenever a business considers how to grow. It links closely to the choice between internal growth and external growth: market penetration and product development are usually achieved internally, while market development and especially diversification are often achieved through takeovers, joint ventures, strategic alliances or franchising, which give the business knowledge it lacks.
It also links to marketing. A marketing plan states which Ansoff strategy the business will follow and then designs a marketing mix for it. The product life cycle shows when a product needs product development (extension strategies) or market development (new markets for a mature product). The Boston Consulting Group matrix shows which products generate the cash that can fund riskier strategies elsewhere in the portfolio.
Tool | How it works with the Ansoff matrix |
|---|---|
SWOT analysis | Comes first: strengths show which strategies the business can carry out; opportunities show where growth is possible. |
STEEPLE analysis | Assesses the external environment of a new market before market development or diversification. |
Decision tree | Compares Ansoff options using estimated probabilities of success and payoffs (expected value). |
Investment appraisal | Tests whether the cost of a strategy (a new factory, a takeover) is recovered by its returns. |
Market research | Reduces risk in product and market development by testing customers’ reactions first. |
The matrix classifies options but does not by itself rank them. A simple way to compare options is to estimate the payoff of each if it succeeds or fails, and the probability of success, and to calculate an expected value, as in a decision tree.
The Ansoff matrix has been used for more than sixty years because it is simple and it shows clearly how risk changes with each type of growth. The same simplicity is the source of most of its limitations, which the table summarises.
Advantages | Limitations |
|---|---|
Simple and quick: a clear framework for comparing growth options. | Oversimplifies: real options are not just “existing” or “new” but lie on a scale (a slightly new product, a neighbouring market). |
Makes the link between growth and risk explicit, which encourages careful planning. | Shows risk only in general terms; it does not measure the risk, cost or return of a specific option. |
Encourages managers to consider all four routes to growth, not only the most familiar. | Ignores competitors’ reactions, which can make even market penetration risky. |
Works well with other tools (SWOT, STEEPLE, decision trees, the BCG matrix). | Classification can be subjective: the same move may be placed in different cells depending on how the market is defined. |
Applies to any organisation, including non-profits planning to reach more people. | Considers only growth; it says nothing about strategies such as consolidation, cost cutting or withdrawal. |
Several limitations deserve explanation. First, the matrix treats products and markets as either existing or new, but in practice novelty is a matter of degree: a new flavour of a drink is far less risky than a completely new type of product, though both count as product development. Second, the matrix is about the business’s own knowledge, so a strategy that is low risk for one firm may be high risk for another. Third, it ignores the competitive response. When one firm cuts prices to penetrate a market, rivals may follow, leaving every firm with lower profit.
A further limitation is that the matrix gives no figures. It can say that diversification is riskier than market penetration, but not whether a particular diversification will earn enough to justify its risk. For that, managers need market research, sales forecasts, investment appraisal and decision trees, and the qualitative judgment of people who know the market.
The usefulness of the Ansoff matrix therefore depends on how it is used. It is most valuable as a first step that lays out the options and their broad risk, followed by detailed analysis of the most promising ones. It is weakest when a single cell is treated as the answer. Its value also depends on the business: for a small firm with limited cash, the matrix’s warning about risk is especially important, while a large firm with many resources can use it to build a balanced portfolio of low-risk and high-risk growth.
Netflix was founded in 1997 in California as a DVD rental business and began mailing DVDs to subscribers in 1998. Over the following quarter of a century it used every cell of the Ansoff matrix, and its annual revenue rose from about US$1.2 billion in 2007 to US$45.2 billion in 2025. Its history shows how a business can move between strategies as its market changes, and how the risk of each move differs.
Netflix’s first big move was product development. In January 2007 it began offering films by online streaming to its existing US subscribers, a new product for the same customers. This made use of what Netflix already had, namely a subscriber base and data on what they watched, and it protected the business against a threat to DVD rental. It later added original series, beginning with House of Cards in February 2013, so that members had content they could not find elsewhere.
More recently it has added live events, such as a boxing match between Jake Paul and Mike Tyson in November 2024, which Netflix reported had an average audience of 108 million viewers worldwide, and NFL games on Christmas Day.
With streaming established in the United States, Netflix turned to market development: the same service in new countries. It entered Canada in September 2010, and in January 2016 it launched in 130 more countries at once, making the service available almost everywhere except China. The revenue chart shows that growth accelerated after 2016. Market development carried risks, such as different tastes, languages and regulations in each country, which Netflix reduced by producing local-language content, for example from Korea, Japan, Brazil and Denmark.
When subscriber growth slowed in 2022, Netflix used market penetration to sell more of its existing service in markets it already served. In November 2022 it launched a cheaper plan with advertising in 12 countries, aimed at price-sensitive viewers who did not yet subscribe. In 2023 it began charging for password sharing between households in the United States and other markets, turning shared accounts into paying members. It passed 325 million paid memberships in late 2025, and its advertising revenue grew more than 2.5 times in 2025 to over US$1.5 billion.
Netflix also made smaller moves towards diversification. It launched mobile games in November 2021, buying several games studios, and in 2025 it began offering games played on the television through the cloud. It has also opened Netflix House venues in Dallas and King of Prussia, Pennsylvania, which offer experiences and merchandise based on its shows. These are new products for Netflix, and they reach customers in industries (gaming and live entertainment) where it has no track record.
Year | Move | Ansoff strategy | What was new to Netflix |
|---|---|---|---|
2007 | Online streaming for US members | Product development | The product (streaming) |
2010 | Launch in Canada | Market development | The market (first country outside the US) |
2013 | First original series, House of Cards | Product development | The product (own content) |
2016 | Launch in 130 more countries | Market development | The markets (most of the world) |
2021 | Mobile games | Diversification (debated) | The product and, partly, the market (gamers) |
2022 | Cheaper plan with advertising | Market penetration | Neither: same service, lower price, same countries |
2023 | Charging for password sharing | Market penetration | Neither: converting existing viewers into members |
Sources: Netflix, Inc., shareholder letters Q4 2025 (20 January 2026) and Q1 2026 (16 April 2026); Form 8-K filings of 5 December 2025 and 27 February 2026 and Form 10-K filings (SEC); Netflix, “Jake Paul vs. Mike Tyson: over 108 million live global viewers” (19 November 2024); Netflix history via Wikipedia, fetched 2026.
The case supports the matrix’s view of risk. Netflix’s biggest moves were product development and market development, each changing one dimension at a time, and its diversification into games has so far been small. The case also shows a limit of the matrix: classification depends on how the market is defined. Games are a new industry for Netflix, which suggests diversification, but they are offered to existing members at no extra charge, which suggests product development.
Netflix’s attempt to buy Warner Bros. shows a further point. On 4 December 2025 Netflix agreed to buy the film and television studios and streaming business of Warner Bros. Discovery (WBD), an acquisition that would have brought it new products and capabilities through external growth. When WBD’s board judged a rival proposal from Paramount Skydance to be superior, Netflix declined to raise its offer, and on 27 February 2026 WBD ended the agreement, which entitled Netflix to a US$2.8 billion termination fee.
Netflix told its shareholders that Warner Bros. would have sped up its strategy, but only at the right price. The agreement also carried a risk for Netflix, which would have owed WBD US$5.8 billion if the deal had failed to gain competition or regulatory approval. The matrix could describe the option, but the decision to walk away depended on price and return, which the matrix does not measure.
Explain why Netflix’s launch in 130 more countries in 2016 is an example of market development rather than product development.
Analyse the risks Netflix faced when it began streaming in 2007, using the Ansoff matrix.
Examine whether Netflix’s move into games should be classified as product development or diversification.
The next question asks for the matrix to be applied to options from a case.
The Ansoff matrix classifies growth strategies by whether the products and markets are existing or new to the business.
Market penetration sells more existing products in existing markets and carries the lowest risk.
Product development (new products, existing markets) and market development (existing products, new markets) carry medium risk.
Diversification (new products, new markets) carries the highest risk; related diversification gains from synergy, unrelated diversification does not.
Higher risk can bring higher potential returns; the right choice depends on objectives, finance, skills, competition and the state of the existing market.
The matrix works best with other tools: SWOT, STEEPLE, decision trees, investment appraisal and the BCG matrix.
Its limitations: it oversimplifies, does not measure risk or return, ignores competitors’ reactions and can be applied subjectively.
I can describe the Ansoff matrix and label its two axes correctly.
I can explain market penetration, product development, market development and diversification, with a real example of each.
I can explain why risk rises from market penetration to diversification.
I can distinguish related from unrelated diversification.
I can construct an Ansoff matrix and place a business’s growth options in it.
I can apply the matrix to a growth decision together with SWOT analysis or a decision tree.
I can explain the advantages and limitations of the Ansoff matrix.
Award [1] for a partial definition that shows some understanding, e.g. “a way a business earns money” or a reference to income without the idea of different sources.
Award [2] for a full definition, e.g. a distinct source of income for a business from a particular activity, product or customer group; total revenue is the sum of the business’s revenue streams (for TAE: hire, tours, repairs and sales of used e-bikes).
Candidates are not expected to word their definition exactly as above.
Using examples from paragraph 2, distinguish between fixed costs and variable costs for TAE.
4 marks
Fixed costs do not change with the level of output (the number of hires) in the short term. At TAE they include the shop lease, the insurance of the fleet and Callum’s annual salary: they are paid whether TAE hires out 5 or 500 e-bikes in a month.
Variable costs change directly with the level of output. At TAE they include the NZ$140 paid to a guide for each tour and the electricity used to charge the batteries, which rise as more tours and hires take place.
Award [1] for a correct explanation of fixed costs and [1] for a correct explanation of variable costs.
Award [1] for a relevant example of each type of cost taken from paragraph 2, up to [2].
Award a maximum of [2] for a theoretical answer with no examples from TAE.
Explain two benefits to TAE of having several revenue streams.
4 marks
Benefits may include:
Spreading risk: if hire revenue falls (e.g. fewer international tourists), repairs for local riders and sales of used e-bikes still bring in income.
Covering fixed costs: the shop lease, insurance and Callum’s salary must be paid every month; revenue from repairs, which local riders need all year, helps pay them in winter when hire revenue falls by about 70 %.
Using existing resources more fully: Callum’s skills and the shop space earn revenue from servicing as well as hire.
Recovering value from assets: selling used e-bikes each season brings in cash that can help fund new bikes.
Cross-selling: hire customers may book a guided wine-trail tour, raising revenue per customer.
Accept any other relevant benefit applied to TAE.
Mark as 2 + 2. For each benefit, award [1] for identifying a relevant benefit and [1] for explaining it in the context of TAE.
Award a maximum of [2] in total for a theoretical answer with no reference to TAE.
Discuss whether TAE should introduce ski and snowboard hire as a new revenue stream in winter.
10 marks
Candidates may use the Ansoff matrix: offering ski hire to existing (tourist) customers in an existing market is closer to product development, while reaching skiers who are new to TAE has elements of diversification, which carries more risk.
Arguments for ski hire:
It tackles TAE’s main problem: revenue falls by about 70 % in winter while fixed costs (lease, insurance, salary) stay the same, and TAE made a loss in four winter months in 2025.
It uses resources that are idle in winter: the shop space and Callum, who is paid an annual salary anyway.
The waterfront location is a point of difference: no competitor offers ski hire there, so tourists staying in town could collect equipment the evening before.
A year-round business may be more attractive to lenders and reduce Huia’s need to use her personal savings.
Arguments against ski hire:
Strong, established competitors are located near the ski fields, where skiers need their equipment; TAE’s location may be a disadvantage, not an advantage.
The NZ$85 000 loan adds interest (a new fixed cost) and repayments to a business that already has cash flow problems; as a sole trader Huia has unlimited liability.
TAE lacks experience in the ski market: Callum would need training, and fitting ski boots is a specialist skill.
Annie Zhou’s alternative, winter discounts for local riders, needs no investment and builds on TAE’s strengths, although it may only raise revenue slightly.
Ski equipment would be used for only five months a year and stored for the other seven.
Possible conclusion: for example, that TAE should test demand first (e.g. by leasing a small amount of equipment rather than borrowing NZ$85 000) while introducing Annie Zhou’s local discounts, or that the fixed-cost burden justifies the new stream. Any well-supported judgement can gain full marks.
Limitations of the case that strong answers may note: there are no figures for expected ski-hire revenue, running costs or the interest rate, and no market research on whether tourists would hire skis in town.
Marks should be allocated according to the markbands below.
Additional guidance: a one-sided answer (only for or only against ski hire) can be awarded a maximum of [5]. Answers with no conclusion or judgement are unlikely to be awarded more than [6]. Answers that do not use the information on TAE’s winter revenue, fixed costs or the NZ$85 000 loan can be awarded a maximum of [4].
Markbands (10-mark extended response, Papers 1 and 2)
Marks | Level descriptor |
|---|---|
0 | The response does not reach the standard described below. |
1–2 | Little understanding of what the question demands. Business management tools and theories are barely used, or are irrelevant or inaccurate. Little or no reference to the stimulus material. No arguments are made. |
3–4 | Some understanding of what the question demands. Some use of tools and theories, but mostly inaccurate or not relevant. Use of the stimulus is superficial, often no more than the name of the organisation or person. Arguments are mostly unsubstantiated. |
5–6 | Understands what the question demands but addresses it only partially. Some relevant, accurate use of tools and theories. Some relevant use of the stimulus beyond names, but it does not effectively support the argument. Arguments are substantiated but mostly one-sided. |
7–8 | Mostly addresses what the question demands. Mostly relevant, accurate use of tools and theories. The stimulus generally supports the argument, with some lapses in clarity or relevance. Arguments are substantiated and show some balance. |
9–10 | Clear focus on what the question demands. Relevant, accurate use of tools and theories. Relevant stimulus material is integrated effectively to support the argument. Arguments are substantiated and balanced, and the limitations of the case or stimulus material are explained. |
A response with no judgement or conclusion is unlikely to reach the top band of a discuss, evaluate, examine or recommend question.
Siriwat Group
[1] Siriwat Group is a family-owned private limited company in Bangkok, Thailand. It makes plastic packaging for food manufacturers and employs 1 800 people in three factories. The packaging business is profitable, but demand for single-use plastic is expected to fall as Thailand introduces stricter environmental laws.
[2] The group’s chairman, Anan Siriwat, has agreed to acquire Phuket Palms, a chain of six beach resort hotels. He believes tourism will grow strongly over the next decade and wants to spread the group’s risk. His daughter Nok, the group’s operations director, will manage the hotels, although she has no experience of tourism.
[3] Packaging customers have asked whether Siriwat will continue to invest in recyclable packaging, and some factory managers worry that profits from packaging will be used to modernise the hotels.
Identify two external growth methods other than acquisition.
2 marks
Explain why the acquisition of Phuket Palms is an example of conglomerate (diversified) growth, with reference to the Ansoff matrix.
4 marks
Analyse the advantages and disadvantages for Siriwat Group of acquiring Phuket Palms.
6 marks
Horlogerie Mauler SA is a family-owned watchmaker in La Chaux-de-Fonds, Switzerland. For 90 years it has made mechanical watches sold through jewellers in Switzerland and Germany. Its new chief executive, Fabien Mauler, has set the strategic objective “to earn 30 % of revenue from smartwatches sold in South-East Asia by 2030”. Mauler has no experience of electronics and no sales outside Europe.
Using the Ansoff matrix, explain the level of risk of Mauler’s new strategic objective.
4 marks
Describe one tactical objective that Mauler could set to support this strategic objective.
2 marks