Strategies for small business growth & the Ansoff Matrix

by Harshal Bathija
Published: Last Updated on

We all know how important it is for a business to grow but do we realize just how important it is to plan for said growth? Here’s looking into the various strategies for a small business with regard to growth.

Rounding up the last three years of small business growth statistics, on average, a whopping 90% of startups failed/shut down at the nascent stage. Sound overwhelming? Let us break it down for you. 

Some of the common reasons involved:

  • Lack of funding 
  • Lack of guidance 
  • Lack of marketing efforts 

In short, the ventures lacked a growth strategy. Overcoming all the above challenges and more is why a business growth strategy is of utmost importance while starting a business. 

And we want to be of assistance to you through the process of picking the right strategy based on adequate research. So let’s jump right in and understand the different types of plans for small business growth out there and what they can do for your business. 

Have you ever come across the Ansoff Matrix? 

(We’re not talking about Keanu Reeves at all, that’s a separate blog post altogether.)

Ansoff Matrix Meme

The Internet does not have enough Ansoff Matrix memes, and so we made one for this occasion. 

The Ansoff Matrix 

The Ansoff Matrix was made by applied mathematician H. Igor Ansoff and published in 1857 as part of the Harvard Business Review. 

From what we understand, it is a growth strategy matrix developed keeping the risk aspect in mind. 

Strategies for small business
The Ansoff Matrix

As you can see, the 2×2 matrix highlights four growth strategies depending on a variation of product-market mix ,and underlining the risk involved.

Why does this matrix matter for you? 

The Ansoff Matrix is a great jump-start point for you to understand which strategy is best suited for your business. It gives you a clear understanding of which one to employ and how much risk you will be undertaking in the process.

If you’re wondering whether the Ansoff Matrix can be helpful for you, we have a solution! Nothing solves a dilemma like a pros and cons list: 

Pros and cons of Ansoff Matrix

Let us dissect the matrix and understand each growth strategy – how it works, the advantages and disadvantages along with real-time market examples of each strategy. Keep in mind to look at this as strategies for your small business’ growth.

Strategies for Small Business 1. Market Penetration Strategy 

Existing Product in an Existing Market. 

The first section of the grid – Market Penetration – is a business growth strategy that focuses on penetration into the existing market with an existing product. 

If you find an opportunity for further growth in your current product-market situation, this is the strategy best suited for you. 

Market Penetration can be a measurement and a strategy. 

In order to measure Market Penetration Rate, use the following formula:

What is marketing penetration rate?

Marlene Jensen, the author of Pricing Strategy, explains that the normal penetration rate for a B2C focused product is between 2% and 6% whereas for a B2B focused market it is between 10% and 40%. 

When it comes to the Market Penetration Strategy, there are a few different ways of implementing it: 

  • Lowering the pricing of the product.
  • Changing the features of the product.
  • Acquiring competitors in the same market so as to increase market share thereby penetration. 
  • Producing different versions of the same product. 
  • Developing a new marketing plan. 

The next step is looking at possible pros and cons with this strategy: 

  • It involves the least amount of risk among the four strategies in the Ansoff Matrix. 
  • Improvement in sales of the product which leads to increased profits. 
  • Increase in the brand presence and overall visibility. 
  • Lowering the prices might dilute the consumer’s trust in the product. 
  • Penetration does not always reach the target audience; this leads to visibility in front of the wrong category of audience, which will not prove to be helpful. 
  • Market Penetration might hurt the business internally in terms of pricing and marketing plans. 

For Example, the smartphone industry in India holds an estimated 44% of market share as of 2021.

In this, Samsung recently became No.1 in the country holding a 24.2% share with Xiaomi at a close second position holding 23.3% share in the smartphone industry. These companies use the Market Penetration Strategy and periodically come up with new versions of their existing smartphones to cater to an existing consumer base. 

Strategies for Small Business 2. Market Development Strategy

Existing Product in a New Market. 

This strategy among other strategies for small business growth is usually executed when the existing market shows no scope for further growth i.e. the market has been optimally penetrated.

In this situation, the business looks to introduce the existing product to a new market so as to soar higher on the growth chart. 

Different ways to execute this strategy are: 

  • Expanding into new geographical locations (domestic and international)
  • Widening the target audience to a wider range thereby securing new market space.

Some of the pros and cons that come with this strategy are: 

  • If you have proprietary technology backing your product, there is a certain chance at success while expanding into new markets. 
  • Tapping into new markets. 
  • Increasing the brand footprint. 
  • Requirement of substantial capital investment. 
  • Logistical difficulties for the product and installment, if any. 
  • Finding the right market to enter. 

A famous example of Market Development growth strategy is the entry of Seattle-based brand Starbucks in India in 2011.

One of the primary reasons for Starbucks to enter new geographical markets is developing and increasing their market, thereby increasing the brand footprint and overall profits of the company. 

Strategies for Small Business 3. Product Development Strategy

New Product in an Existing Market. 

This strategy can be implemented when the existing product does not show future growth prospects. Product Development requires investment in Market Research, R&D for feasibility of the product, etc. Essentially, the strategy involves starting a new vertical of the business from scratch. 

Some of the key pointers to keep in mind for this strategy are: 

  • Importance is given to innovation. 
  • The product should cater to your existing market for this strategy to work. 
  • Your overall product portfolio should be aligned with your brand’s identity.

As for the pros and cons tailing this strategy: 

  • Being established, any new product enjoys the brand reputation and trust. 
  • A new product denotes staying relevant to the growing market. 
  • This will increase job opportunities. 
  • R&D costs can prove to be expensive. 
  • The product will go up against that of existing competitors in the market. 
  • Timing is crucial as the market today is dynamic and businesses are constantly coming up with new ideas and products. 

Hero launched Hero Electric – their range of electric bikes – back in 2007. As of Feb 2021, the company has captured 36.33% of market share in the electric bike sector with a YoY growth of 258.5%!

This is a successful representation of the Product Development strategy. (Stats Source:

Strategies for Small Business 4. Diversification Strategy 

New Product in a New Market. 

The fourth and final strategy for small business growth as per the Ansoff Matrix

This strategy is the most exciting among the four growth strategies (read: highest risk quotient). The final strategy in the Ansoff Matrix involves diversifying the business portfolio with a new product in a new market.

It throws out the traditional risk rulebook and requires intense decision-making. Diversification is usually the least chosen strategy and with good reason; not every business is capable of implementing such a strategy. 

There are four types of diversification strategies. Let’s have a look at each of them briefly. 

  • Horizontal Diversification – This is when your business is looking to create a new product that can align with some needs of your current consumer base. In this way, you’re leveraging your existing clientele to mitigate risk. An example would be Classmate by ITC. Classmate initially started with books and later diversified their portfolio into stationery products. 
Raw materials to consumer flow chart.
  • Vertical Diversification – A situation in which you decide to move up or down the supply chain to diversify your current portfolio. This strategy has a forward approach and a backward approach depending on where your business currently stands in the supply chain.

    Example – Infiniti Retail (popularly known as Croma) went from an aggregate retailing establishment to manufacturing their range as well. 
  • Concentric Diversification – When the business enters a new product-market scenario with similar technical know-how and professional competencies.

    This strategy is implemented when the current product is fetching losses for the business to offset it with the new product’s revenue whilst minimizing costs. An example is Samsung diversifying their portfolio from household appliances to smartphones. 
  • Conglomerate Diversification – Okay, quick! Think about the riskiest thing you’ve done in your life. Now multiply that 10x and you’ll get a basic understanding of the risk this strategy carries.

    The most lucrative of the entire Ansoff Matrix is the conglomerate diversification strategy. The business enters a new market with a new product with zero relevance to their existing product-market portfolio.

    A popular example is 48 year old Reliance Industries Limited (RIL). They have eight companies in their portfolio ranging across diversified industries (Telecommunication, Entertainment, etc). RIL has successfully implemented the conglomerate diversification strategy time and again, seizing opportunities across different industries. 

We saw the different types of diversification strategies, let’s discuss the pros and cons attached to them: 

  • Increase in Brand Visibility and Market Share across industries.
  • Unlocking greater profitability. 
  • The Business becomes a force to reckon with. (Eliminating competition below a certain level) 
  • It is the most complex among the four strategies for execution.
  • Uncertainty is tied to the product and the market involved.  
  • Lack of airtight research can lead to the downfall of the business. 

We have largely covered the following:

  • Strategies for small business growth,
  • The Ansoff Matrix, 
  • The four different types of business growth strategies,
  • The what, how, why, pros and cons of each strategy,
  • And the risk attached to each type of strategy. 

Having read this, your vital next steps are to: 

  • Assess and analyse the data at hand 
  • Understand which growth strategy best aligns with your goals
  • Put together a Plan of Action (POA) for your business’ growth 
  • The key aspect tying everything together: Execute!

Where we come into the picture  

Now more than ever before, a strong digital marketing strategy is required for your business to succeed. And as it turns out, Profitcast is a research-driven digital marketing agency, who thrive on seeing their clients succeed. We fit the profile and look forward to accomplishing your growth strategy goals with you. 

Until next time, take care and stay safe.


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