Ansoff Matrix | McDonald's Business Strategy
Summary
TLDRThis video explains the Ansoff Matrix, a strategic planning tool used to identify business growth strategies. It covers four key strategies applied by McDonald's: market penetration (boosting existing product sales in current markets), product development (introducing new products like vegan burgers in existing markets), market development (selling existing products through new channels, such as delivery), and diversification (selling new products in new markets). The video highlights the varying risk levels of each strategy, with diversification being the riskiest and market penetration the least risky.
Takeaways
- 📈 The Ansoff Matrix is a strategic planning tool used to identify growth strategies for businesses.
- 🍔 Market Penetration involves selling existing products in existing markets, like McDonald's promoting Big Macs.
- 🚀 Product Development is about introducing new products in existing markets, exemplified by McDonald's vegan burger.
- 🔍 Market Development is selling existing products in new markets, such as McDonald's delivery services.
- 🌐 Diversification is the riskiest strategy, involving new products in new markets.
- 💡 McDonald's uses market penetration to increase frequency of use and drive out competition.
- 🏆 Being first to market is crucial for McDonald's in product development.
- 🔑 Understanding customer needs is key for McDonald's to implement new products.
- 🛍️ Market Development involves selling via new channels, like online sales or delivery services.
- 🌍 Geographical expansion is a part of McDonald's market development strategy.
- ⚠️ Diversification requires significant research and development and carries the highest risk.
Q & A
What is the Ansoff Matrix?
-The Ansoff Matrix is a strategic planning tool that helps managers and marketers identify potential growth strategies for a business. It includes four strategies: market penetration, product development, market development, and diversification.
What are the four growth strategies in the Ansoff Matrix?
-The four growth strategies in the Ansoff Matrix are market penetration, product development, market development, and diversification.
How does McDonald's use the market penetration strategy?
-McDonald's uses the market penetration strategy by selling its existing products, like the Big Mac, in its existing market. They ramp up marketing efforts to increase customer frequency, grow market share, and drive out competitors like Burger King, KFC, and Taco Bell.
What is an example of product development at McDonald's?
-An example of product development at McDonald's is the introduction of the vegan burger. This involves creating new products to meet customer needs within existing markets.
Why is being first to market important in product development?
-Being first to market is important in product development because it gives the company a competitive advantage. If McDonald's were late in introducing the vegan burger after competitors like Burger King, it would lose potential growth opportunities.
How does McDonald's conduct research for product development?
-McDonald's conducts research for product development by understanding customer needs through extensive research and development efforts. They aim to create products that meet specific customer demands.
What is market development and how has McDonald's applied it?
-Market development involves selling an existing product in a new market. McDonald's applied this strategy by offering delivery services through platforms like Uber Eats, which introduced their products to customers in new ways.
What are some key features of the market development strategy?
-Key features of the market development strategy include selling through new channels (such as online delivery), targeting new demographics, changing pricing strategies, or expanding to new geographical areas.
What makes diversification the riskiest strategy in the Ansoff Matrix?
-Diversification is the riskiest strategy because it involves selling new products in entirely new markets. This carries higher risk since both the product and market are untested for the business, increasing the likelihood of failure.
How does McDonald's minimize risk when implementing the Ansoff Matrix strategies?
-McDonald's minimizes risk by using a combination of strategies, such as market penetration with existing products in familiar markets, and gradually moving toward riskier strategies like product development, market development, and diversification.
Outlines
📊 Introduction to the Ansoff Matrix
This paragraph introduces the Ansoff Matrix, a strategic planning tool used by managers and marketers to identify growth strategies for a business. It outlines the four main strategies: market penetration, product development, market development, and diversification, each carrying its own level of risk. McDonald's will be used as a case study to demonstrate how these strategies work.
🍔 Market Penetration at McDonald's
The focus here is on market penetration, which involves selling existing products in existing markets. McDonald's uses this strategy by increasing marketing efforts for products like the Big Mac to boost market share and outperform competitors such as Burger King, KFC, and Taco Bell. The goal is to encourage more frequent purchases and reduce competition.
🥗 Product Development: The Vegan Burger Strategy
This paragraph explains product development, where new products are sold in existing markets. McDonald's example is the introduction of the vegan burger. Success in this strategy requires being first to market and understanding customer needs. It also emphasizes the importance of research and development to meet customer demands with new products.
🌍 Market Development: McDonald's Expansion
Market development involves selling existing products in new markets. McDonald's has done this by introducing delivery services through platforms like Uber Eats, tapping into new channels and geographical areas. Other approaches to market development include targeting new demographics and adjusting pricing strategies.
🔄 Diversification: McDonald's Most Risky Move
Diversification is the riskiest strategy, where a company sells new products in new markets. McDonald's must develop new products and research the unfamiliar markets they enter. This strategy carries the highest chance of failure compared to other growth strategies, as it involves risks in both product and market.
🚦 Risk Levels of McDonald's Strategies
This final paragraph compares the risk levels of the four strategies. Market penetration is the least risky as McDonald's is selling well-established products like Happy Meals in familiar markets. Product development and market development carry moderate risk as they involve either new products or new markets. Diversification is the most risky, involving new products in entirely new markets.
✅ Conclusion and Invitation for Questions
The video concludes with a recap of the Ansoff Matrix strategies used by McDonald's, highlighting their varying risk levels. The speaker encourages viewers to ask any questions in the comment section and thanks them for watching.
Mindmap
Keywords
💡Ansoff Matrix
💡Market Penetration
💡Product Development
💡Market Development
💡Diversification
💡Risk Levels
💡McDonald's
💡Competition
💡Customer Needs
💡Delivery Services
Highlights
The Ansoff matrix is a strategic planning tool used by managers and marketers to identify potential growth strategies.
The four growth strategies in the Ansoff matrix are market penetration, product development, market development, and diversification.
Market penetration involves selling existing products in existing markets, such as McDonald's Big Mac in fast-food restaurants.
McDonald's uses market penetration by ramping up marketing efforts to increase frequency of use, market share, and drive out competition like Burger King, KFC, and Taco Bell.
Product development involves selling new products in existing markets, like McDonald's introduction of the vegan burger.
One key factor in product development success is being first to market, as McDonald's aims to do with their vegan burger.
Product development requires understanding customer needs, necessitating significant research and development.
Market development involves selling existing products in new markets, such as McDonald's offering delivery services through Uber Eats.
Key elements of market development include selling via new channels, targeting new demographics, changing pricing strategies, and expanding into new geographical areas.
McDonald's success in market development is evidenced by its global expansion and adaptation to new delivery methods.
Diversification is the most risky strategy in the Ansoff matrix, involving selling new products in new markets.
Diversification requires both new product development and extensive market research, increasing the risk of failure.
Market penetration is McDonald's least risky strategy as it involves selling well-established products like Happy Meals in established markets.
Product development, such as the introduction of the vegan burger, carries more risk but is mitigated by leveraging existing stores and customer base.
McDonald's diversification efforts are the riskiest but have the potential for high reward by entering new markets with new products.
Transcripts
in this video I'm going to be discussing
the ansoff matrix and how it looks at
McDonald's first of all the an soft
matrix is a strategic planning tool that
managers and marketers use to identify
potential growth strategies for a
business these four growth strategies
are market penetration product
development market development and
diversification each strategy comes with
its own level of risk we're now going to
look at how these strategies have worked
at McDonald's the first strategy we're
going to look at is market penetration
this is selling the existing product in
an existing market such as the Big Mac
in fast-food restaurants what we're
doing this strategy is they ramp up
their marketing efforts for this
particular product in the hopes that
this will increase the frequency of use
by its customers increase market share
and most of all drive out competition
from the likes of Burger King KFC and
Taco Bell the second strategy
Mehnaz are successfully using is product
development this is selling new products
in existing markets so for example the
vegan burger one key feature of this
strategy and why it's been successful at
McDonald's is that you need to be first
to market no point in McDonald's
implement in this strategy in the hopes
of growing if they are six months behind
Burger King implementing their own vegan
burger another part of this strategy is
it must understand customer needs
so what dolls need to know exactly what
their customers need in order to
implement new products into the market
and finally this means a lot of research
and development you need to go out and
see what the customers need and want and
then develop a product that meets that
specific need
the third strategy I want to McDonalds
most recent successes is market
development market development is sell
an existing product in a new market the
key features of this strategy are
selling via new channels so for example
if you a bricks and mortar store you're
then selling online which would be a new
channel or like McDonald's to do him
offering delivery when previously this
was not an option also you could sell to
a new demographic or you could change
your pricing strategy and go from a
low-end product to a premium product
this would then classes market
development and finally you could sell
in new geographical areas so you could
expand your business and this is
something that McDonald's has done
extremely well over the last decade the
final strategy and most risky strategy
is diversification as this is selling
new products in a brand new market
this means that you've got to develop
new products but also research the
market that they're going into this is
the most risky because it's brand new
for both areas which means it's got a
more likely chance of failing compared
to market penetration where McDonald's
have got an established market and they
also have an established product that
they're well known for so how does
McDonald's walk on the an sauce matrix
so the first thing they've got is market
penetration this is McDonald's least
risky strategy
as they're selling existing products
such as happy meals and their burgers in
existing markets which is in their store
a more risky strategy would be product
development such as the vegan burger as
they sell a new product bought in their
stores which makes it less risk it the
next strategy is market development this
has a similar risk to product
development as you are selling an
existing product however this time it's
in a new market
so like we discussed uber eats and
McDonald's offering delivery finally the
most risky strategy is diversification
we're met dolls are selling a new
product within a brand new market and
this has the highest level of risk
I hope this explainer video has been
useful to you please ask any questions
in the comment section thanks for
watching
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