Ansoff Matrix | McDonald's Business Strategy

Summary

This 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

00:00

📊 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.

Keywords

💡Ansoff Matrix

The Ansoff Matrix is a strategic planning tool used by managers and marketers to identify potential growth strategies for a business. In the video, it serves as the central framework for analyzing McDonald's strategies in expanding its market and product offerings. The matrix is divided into four growth strategies: market penetration, product development, market development, and diversification.

💡Market Penetration

Market penetration refers to the strategy of increasing sales of existing products in an existing market. In the context of McDonald's, this involves intensifying marketing efforts for products like the Big Mac to boost market share and reduce competition. It's the least risky strategy in the Ansoff Matrix as it focuses on familiar products and markets.

💡Product Development

Product development is the strategy of introducing new products into existing markets. McDonald's example of this is the launch of the vegan burger. This strategy requires significant research and understanding of customer needs to ensure success. The video emphasizes that being first to market, as in McDonald's case, can be crucial for the success of product development.

💡Market Development

Market development involves selling existing products in new markets. For McDonald's, this strategy is seen in their shift to offering delivery services through channels like Uber Eats. This involves expanding the reach of products like the Big Mac to new customer bases, geographical areas, or through new sales channels.

💡Diversification

Diversification is the most risky strategy in the Ansoff Matrix. It involves selling new products in new markets, meaning both the product and the market are unfamiliar to the business. McDonald's example of diversification would involve exploring entirely new product lines in markets they have never operated in before, which carries a higher chance of failure.

💡Risk Levels

Risk levels are a key aspect of the Ansoff Matrix strategies, as each growth strategy comes with varying degrees of risk. In the video, market penetration is described as the least risky strategy because McDonald's is selling familiar products in known markets, while diversification is considered the most risky due to the newness of both the product and the market.

💡McDonald's

McDonald's is the central business being analyzed in the video. The video explores how McDonald's has employed different strategies from the Ansoff Matrix to achieve growth, such as increasing marketing for existing products, developing new products like the vegan burger, expanding into new delivery channels, and exploring risky diversification options.

💡Competition

Competition refers to the rival businesses McDonald's faces in the fast-food industry, such as Burger King, KFC, and Taco Bell. In the video, competition is particularly relevant in the discussion of market penetration, where McDonald's ramps up marketing efforts to increase market share and outpace competitors in the existing market.

💡Customer Needs

Understanding customer needs is crucial for the success of strategies like product development. The video emphasizes that McDonald's must conduct research to know exactly what their customers want, such as the rising demand for plant-based options like the vegan burger. This knowledge helps McDonald's create products that meet those needs and succeed in the market.

💡Delivery Services

Delivery services are highlighted in the market development strategy, where McDonald's expands its reach by offering products through new channels like Uber Eats. This is an example of how McDonald's has adapted to changing customer preferences, by making their products more accessible through home delivery, a new way to serve existing customers.

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