Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Special Issue, volume II/2017THE USE OF ANSOFF MATRIX IN THE FIELD OF BUSINESSECOBICI MIHAELA LOREDANALECTURER PHD., “CONSTANTIN BRÂNCUŞI” UNIVERSITY OF TG-JIU,FACULTY OF ECONOMIC SCIENCEe-mail: g the risk is and always will be one of the main concerns for the management of a company. One way ofreducing the risk can be diversification strategy. This concept is used very commonly in almost all areas of expertise.In terms of small companies, business diversification implies development of new products and services through theirown efforts, expanding the area of action, as well as the formation of strategic alliances and licensing technologies.The article is based on a theoretical approach of the Ansoff matrix, which is one of the most important tools instrategic planning in order to diversify risks. The strategic options on which the Ansoff matrix is based are: the sale ofexisting products on existing markets, the development and renewal of existing products on new markets, thedevelopment and renewal of new products on existing markets, the development of new products on new markets.The purpose of this article is to present and describe the Ansoff matrix as a means to reduce the risks in thedevelopment of new products on emerging markets. This strategy of diversification has into consideration linking withthe capacity the company achieve realistic goals.The results that will result from this research will facilitate the analysis and the assimilaton of the informationrelated to the Ansoff matrix, and through the general methods of scientific investigation, namely the observation,synthesis, qualitative analysis and exemplification, I will try to offer an extension of the theoretical and practicalknowledge on the Ansoff Matrix.Keywords: Risk, diversification, Ansoff matrix, product, marketJEL Classification: L1- Market Structure, Firm Strategy, and Market Performance1.Introduction and context of the studyIgor Ansoff is one of the pioneers of strategic management planning and in 1957 hedeveloped a matrix a vector of growth. He considered the model of a strategic management consistsin conceiving a strategic plan to contain the overall strategy of the Organization, detalied intoadministrative and financial strategies, a strategy based on markets-products, strategied expressedas aims.The concern regarding the current concerns in the field of the Ansoff matrix study ishighlighted by the multitude of studies and specialty articles. This concept continues to beperceived and understood as one of the most important tools for business development andpenetration int the business activity field. Numerous studies show that the use of Ansoff's matrix inbusiness development is one of the effective variants that entrepreneurs successfully apply.From this point of view, I will mention some sources in the literature in which the Ansoffmatrix is the focus of the study: Ansoff Igor, Strategic Management, Palgrave Macmillan, New York, 2007; Cadle J., Paul D., Turner P., Business Analysis Techniques, 72 Essential Tools for Succes,BCS The Chartered Institute for IT, 2010; Doval E., Analiza strategică a mediului concurențial, Editura FRM, București, 2004; Newton Paul, Bristoll Helen, Ansoff's Matrix, Free Management Books, ISBN: 978-162620-950-3, 2013;„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007141

Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Special Issue, volume II/2017 Blecha L., Diversification strategy – concept and measurement, Ekonomicky Casopis, vol.40, issue 9, pag. 671-684, Slovak Academic Press LTD, 1992; Nan Yin, Application of AHP-Ansoff Matrix Analysis in Business Diversification: Thecase of Evergrande Group, Business School, Nanjing Xiaozhuang University, Nanjing City, China,MATEC Web of Conferences 44, 01006 (2016).Diversification strategy was applied in the '60 in order to ensure the development of severalcompanies. The design started from the assumption that a good manager can manage sevealbusinesses even if there are no links between them. Diversification involves the presence within anorganisation of two or more tasks, each of which could constitute the unique activities ofspecialized companies. A firm is diversified if, without entierly giving up its former productiveactivities, it engages in the manufacturing of new products rather different through significantdifferences in the activity of production or distribution. Diversification involves the participation onvarious markets. [9]The present research has as a general objective the facilitation of the understanding andassimilation of general and practical information on the Ansoff matrix. As part of my scientificapproach, I propose to address the following objectives:- presentation of the concept of diversification strategy;- presentation of the Ansoff Matrix;-identifying the types of strategies used by the Ansoff Matrix;-using the Ansoff Matrix by McDonald's.The present study and its results will contribute to the development of the theory and theimprovement of the economic practice in the field of business. It will be the source of variousinvestigative directions, as well as the bibliographic source for other studies in the field. This workalso complements other specialized studies, opening new study directions that could be exploited inthe future.2.Materials and methodsIn starting this research, we start from presenting the link of the theme with the currentconcerns in the field, highlighting the importance of approaching the Ansoff matrix as a methodbased on two key elements (product and market) that interpenetrate in four types of strategiessuccessfully used in business.In economic theory and practice there is a plethora of possibilities to address and analyze thistheme so that my personal approach and the analysis I have employed add to and develop thecurrent and past studies address this topic.In order to achieve the objectives we have used and combined some research methodsspecific to the economic area and here I refer to synthesis, qualitative analysis and exemplification.Also, in the presentation of this article, we have used both theoretical and practical elements.By qualitative analysis I will emphasize the main aspects of the Ansoff Matrix, and on thebasis of the given qualities I will ensure the understanding of this strategic planning tool.The theme underlying the research will be analyzed on its component parts, each beingcomplexly analyzed to highlight its essence. By synthesis, the elements analyzed separately arereunited, reconstituting the whole, already knowing the key element and synthesizing the mainaspects of the researched theme.The exemplification of the use of this strategic planning tool will be done by presenting theelements of the strategy using the qualitative data available to them during the approach to thistheme.The methods we have used in this study are based on a set of suitable means, rules, andmeans of research to present the Ansoff Matrix.„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007142

Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Special Issue, volume II/20172.The concept of diversification strategyThe risk field has been, and will remain one of the most important areas of interest for anyfirm regardless of the business it performs. Risk management and analysis makes it possible toidentify them with an impact on a company's business, being directly related to the efficiency andvalidity of decisions taken at the management level of the firm.Almost any action in the economic reality gets out of the line of predicted or plannedparameters and outcomes, so any manager or entrepreneur assumes a number of risks in theiractivities. Thus, one of the methods of risk reduction in a business is diversification.Diversification strategies are those that help the company achieve greater performance in linewith risk reduction. These lead to the expansion of the company's business by adding new servicesand products, penetrating new markets, licensing technologies, etc.The diversification strategy of the company is the one which expands the scope of itsactivities in different areas from those of its current business. Using a strategy of differentiatedmarketing a company can decide to use more market segments and create separated offers for eachsegment. [5]Diversification strategy at the level of a company based on Ansoff is considering two factors:products and markets, respectively, products to be manufactured and sold in the markets and to besold. Based on those two factors, depending on the objectives, possible risks, duration, etc, one canestablish several strategies for diversification. In the literature of specialty these are calledconcentric diversification, horizontal diversification, diversification by conglomerates. In otherwords, we can choose between the following variants: selling existent products on present markets,extend the existent products on emerging marktes, develop new products on existing markets,develop new products on emerging markets.The main objective of concentric diversification is to coordinate several company actions toachieve an efficient outcome. Thus, it involves the purchase of new products or services that arerelated to the object of activity of the company in order to attract new clients.This diversification technique assumes that the company can use the existing knowledge andskills to gain an advantage. The company can search for new products with technological andmarketing similarities with existing production lines that may be interesting for a new group ofcustomers. Applying a concerted diversification strategy can also benefit the triggering of businesssynergies, improved production capacity and a better market share. Business synergy is the abilityof two or more parts of an organization to achieve a greater overall efficiency than the efficiencyachieved by aggregating the efforts of each party. [10]Horizontal diversification is the strategy used by business firms to expand business andincrease profits. This involves the creation of new products or the acquisition of firms whose objectof activity is not similar to the one already in place.The purpose of introducing new products into the portfolio, products that are not related toexisting products, is to try to promote and sell these products to existing customer base. Thisstrategy, therefore, does not intend to attract other categories of clients, as is the case with othertypes of diversification, but focuses on offering a wider range of existing customer base products.[10]Vertical diversification implies that a company buys other firms that act as a supplier on theacquisition chain in order to increase business influence or market share.Every product manufactured by a company needs functional components, base materials andothers that are assembled together to get the finished product. Each of these parts that make up thefinal product can be obtained from different suppliers. A large manufacturer can buy, for example,a part of the suppliers they work with. Thus, vertical diversification implies expansion to the„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007143

Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Special Issue, volume II/2017production of components, parts or materials. However, the object of activity, the processes andtechnologies with which these providers operate are different from those of the main object ofactivity. That's why vertical diversification means adapting to both new products and new processesand technologies. [10]3.The Ansoff Matrix - Theory and MethodologyThe Ansoff Matrix, created by the American planning expert Igor Ansoff, ia a strategicplanning tool that links an organisation's marketing strategy with its general strategic direction. Itpresents four alternative growth strategies in the form of a 2x2 table or matrix. One dimension ofthe matrix consider ”product” (existing and new) and the other dimension consider ”markets”(existing and new). [12]Figure no. 1 Ansoff MatrixSource:, Ansoff Matrix. Strategy Skills, 2013The sequence of these strategies is: [12]1.Market Penetration – you focus on selling your existing products or services to yourexisting markets to achieve growth in markets share.2.Market Development – you focus on developing new markets or market segments fouryour existing products or services.3.Product Development – you focus on developing new products or services for your existingmarkets.4.Diversification – you focus on the development of new products to sell into new markets.As for the strategy of penetration, the firm aims at improving the position of existingproducts on offerd on existing markets. This strategy to convince as many consumers, in the currentline-up, to buy the product, otherwise it will operate cost-cutting measures.Developing emerging markets represents a risky strategy, because oned never knows all theaspects concerning the emerging markets that would sell existing products.By offering consumers new products one builds a strategy for creating new products for thecompany, but not necessarily for consumers. These products must offer authentically new featuresin order to be really asimilated by marketplace.„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007144

Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Special Issue, volume II/2017Diversification is the riskiest strategy consisting in offering new products on emergingmarkets.The strategy may include the following variants: horizontal diversification, verticalintegration, concentric diversification or conglomerate diversification. This alternative is adoptedby large firms in the processes of assimilating small companies with different profile of activity. [6]Thus, all four strategies involve different degrees of risk, such as: market penetrationinvolves a low risk, market expansion involves a moderate risk, product development involves amedium risk, and diversification involves the highest risk.The Ansoff product-market matrix can be represented as TRATIONPRODUCTDEVELOPMENTNEWMARKET DEVELOPMENTDIVERSIFICATIONFigure no. 2 Ansoff MatrixSource: Ansoff, 1965, Corporate Strategy, McGraw Hill, p. 109Market penetration means by a strategy by which strategy one aims to increase market shareand it is effective when the market is not saturated. Among measures that can be applied, there are:the development of distribution networks, attracting new clients, upgrading communicationchannels, etc.For example, the increase of visits in a store by offering loyalty points/offers, promotions orrefinancing offers, in the case of banks that want to attract customers. [8]Product development - developing new products or modifying existing products/servicesmarkets. According to Peter Doyle, this alternative raises marketers three types of questions: [8]Can existing products be improved to better respond to the needs of consumers?Can the exgtensions of product lines respond to the latent needs, or attract new customers?Are there products that can be developed, purchased or licensed to support the unique sellingproposal of the company?Market development - is a strategy by which the company identifies or creates new marketsegments in order to absorb the current offer of products and/or services. However, this strategyrequires the involvement of risks arising from: the peculiarities of new outlets, local competition,uncertainty of the market segment that is not profitable enough, etc.Diversification - is a strategy that is carried out either by similar products and markets, eitherby entirely new products and services, free markets unexplored so far. It is the riskiest of the fouralternatives, especially if it is not based on the core competencies of the company. It is most oftenachieved through partnerships or acquisitions in order to mitigate the risks.„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007145

Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Special Issue, volume II/2017For example, I will present the Ansoff Matrix for McDonald'sFigure no. 3 Ansoff Matrix for McDonald'sSource: ff-matrix-for-mc-donaldsIn terms of market penetration, McDonald's focuses on selling existing products or serviceson existing markets to gain market share growth. To this end, they resort to:Happy MealDrive ThroughDelivery ServicesSpeedy ServicesSource: z-krK7TYvCA„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007146

Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Special Issue, volume II/2017McDonald's product development focuses on developing new products or services forexisting markets. In this regard, I mention:Pizza McPuffDate PieMcArabia Grilled ChickenMcAloo TikkiSource: z-krK7TYvCAIn terms of developing the McDonald's market, it focuses on developing new markets ormarket segments with four existing products or services. Regarding this aspect, McDonald's ispresent in 121 countries, being introduced in 2015 and Kazakhstan. At the same time, McDonald'splans to double its current network in India.Diversification at McDonald's focuses on developing new products to sell on new markets. Inthis regard, we have:McCafeThe Golden Arch Hotel„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007147

Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Special Issue, volume II/2017McStopSource: z-krK7TYvCAStarting from the points outlined above, we can state that McDonald's is the company thatsuccessfully implemented all four growth strategies minimizing the risks. Using the Ansoff Matrix,it has expanded to 121 countries and continues to expand to the present day.From a geographic point of view, McDonald's uses products that fully satisfy the wishes andtastes of customers in different geographic areas.In conclusion, applying the Ansoff Matrix can certainly represent the key to success of abusiness.4.ConclusionsAfter analiyzing the conditions of the competitive environment no firm will afford to havecommercial activities without depicting a perspective, both on short and long term in order toensure its economic and financial conditions necessary to obtain profit. Thus, the companymanagement is always responsible to make it possible for the establishment and adoption ofstrategic decisions to materialise into a strategic model that combines all interfaces of action of thecompany: economic, financial and accounting, human and technological aspects, etc.There were have also been designed certain strategic analysis methods that allow diagnosingthreats and opportunities occurring in activities of companies by creating the establishment ofstrategic activity domain who highlights four ways: [9]1. The B.C.G. Method (Boston Consulting Group) - responds to empirical results observedon two phenomena: the effect of experience and the connection between market share andprofitability;2. The General Electric-McKinsey together with variants: Shell, A.D. Little – plurifactorialmethod;3. The PIMS Method (Profit Impact of Marketing Strategy) - which constitutes a database;4. The Porter method - which based on the five forces affecting the State of competition,identifies three strategies: global domination by means of cost, differentiation, specialization or astrategic niche segment.Concerns relating the realization of an analytical framework for determining a marketstrategy have resulted in the development of models, which have contributed to other disciplinesbesides marketing, such as sociology, economics, financial and strategic management. [9]„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007148

Annals of the „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Special Issue, volume II/20175.Bibliography[1] Ansoff I., Strategic Management, Palgrave Macmillan, New York, 2007;[2] Băcanu B., Anti Strategic Management, Teorie şi studii de caz, Ed. Polirom, Bucureşti, 2014;[3] Blecha L., Diversification strategy – concept and measurement, Ekonomicky Casopis, vol. 40,issue 9, pag. 671-684, Slovak Academic Press LTD, 1992;[4] Doval E. Analiza strategică a mediului concurențial, Editura FRM, București, 2004;[5] Neamțu L., Neamțu A., Marketing strategies based on the buying process, Annals of the„Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Issue 2/2016, pag. 129;[6] Păun C., Gestiunea Riscului în afacerile internaţionale, Ed. Universitară, Bucureşti, 2009;[7] Mitran P.C., Analiza strategică a mediului concurențial – sinteza de curs, Facultatea de ȘtiințeJuridice și Economice, Constanța, 2017;[8] *** rumente-de-marketing/matricea-lui-ansoff/[9] 0] re/strategii-dediversificare/[12] ***, Ansoff Matrix. Strategy Skills, 2013.„ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007149

The concern regarding the current concerns in the field of the Ansoff matrix study is highlighted by the multitude of studies and specialty articles. This concept continues to be . Thus, it involves the purchase of new products or services that are related to the object of