Application of Ansoff Matrix to Zara Essay Example | Topics and Well Written Essays - 1500 words

Application of Ansoff Matrix to Zara - Essay Example The present research has identified that Ansoff Matrix is one of the tools which have been used by management for the purpose of strategic planning. Ansoff model was introduced in 1957 by H Igor Ansoff. Ansoff model helps managers to understand the barriers and opportunities in existing and new markets with existing and new products. According to Ansoff model, an organization has four strategies with two based on markets and products or services. According to this matrix, when an organization moves to next quadrant vertically or horizontally, risk increases. The image attached to the appendices section shows the Ansoff model. Ansoff matrix is commonly known as product and market expansion grid and this matrix helps managers to make decisions whether they should expand their business or penetrate in the existing market. Ansoff Matrix shows that management has four strategies and these are; 1. Market penetration 2. Market development 3. Product development 4. Diversification. All these four strategies have some risks associated with them. It is important for the management to identify and analyze risks associated with each strategy and then take the final decision. For many years different companies use this grid for strategic planning. Zara, one of the leading international fashion brands, uses this model to grow their business in different markets as well as within the existing market. For the entire process of business expansion, Ansoff model has been used. Now, this part of the report will discuss and analyze each of the quadrants of Ansoff matrix and apply it to Zara’s expansion. Market Penetration: Market penetration is when a company stays in an existing market with their existing products or services then the risk is very low. A company knows the product is already doing well in a market and market holds few surprises. Market penetration is to go further deep into the market as there are opportunities prevailing in the market but the company has no t capitalized on these opportunities. So to go deep into the market, the company penetrates and increases its market share in the market it is already operating. The company already is aware of the market and its characteristics like barriers to entry and exit or opportunities in the market etc. It is very important for Zara to maintain its market share in existing market with existing products. The company is operating in 59 countries and it is incurring the cost by operating its stores. Therefore by penetrating into the markets where it is already operating, the company can further utilize the markets and increase its market shares in these regions. Thus it can help in improving profitability. Zara has achieved competitive advantage by changing the products quickly. However, industry average to deliver products is nine months whereas Zara’s in-house team is capable to deliver the same in 4 to 6 weeks.