# Ansoff matrix: four growth paths and their risks Source: https://sarang.pro/ansoff-matrix-growth-paths-risks/ Author: Sarang | Published: 25 October 2026 When a business wants to grow, the options can feel endless: new customers, new products, new cities, new sectors. The Ansoff matrix sorts them into four paths and makes one point very clearly. The further you move from what you already sell and who you already sell to, the more risk you take on. This guide explains the four paths, the typical ways to pursue each one, how to compare them, and the matrix's limits. ## Where the matrix comes from Igor Ansoff, an applied mathematician and business manager, introduced the idea in his article "Strategies for Diversification" in Harvard Business Review in 1957, as summarised on [Wikipedia](https://en.wikipedia.org/wiki/Ansoff_matrix). The matrix crosses two questions: are the products existing or new, and are the markets existing or new? Existing productsNew products Existing marketsMarket penetrationProduct development New marketsMarket developmentDiversification Risk generally rises as you move away from the top-left box. Market penetration is usually the least risky path and diversification the most risky, with market development and product development in between. ## Market penetration: more of the same customers Market penetration means selling more of your existing products to your existing market. A [2024 CPA Ireland examiners' article](https://www.cpaireland.ie/CPAIreland/media/Education-Training/2024%20Examinations/Articles/SL-Strategy-and-Leadership-Ansoff-Article.pdf) lists the main methods: winning customers from competitors, getting existing customers to buy more often or in larger amounts, and converting people in the market who do not yet buy the product at all. Pricing, promotion, quality improvements and acquiring a competitor are common tools. The risk is low because you already know the product, the customers and the channels. The limit is that the market may be close to saturation, and winning share from rivals can trigger a price response. ## Market development: existing products, new markets Market development takes what you already sell to new customers. That could mean new segments, new uses for the product, or new places, such as another region or country. The product risk is low, but the market risk is real. The CPA Ireland article notes that it requires understanding new customers and new cultural and regulatory conditions, often with the help of a PESTEL analysis. A product that sells well in Manchester may need different pricing, packaging or permissions in Mumbai. ## Product development: new products, existing markets Product development means offering new products to the customers you already serve. It builds on what you know about them and on the trust your brand already has. It can also use spare capacity, respond to a competitor's launch or take advantage of new technology. The risk comes from the product side: many new products fail, and research, development and launch marketing all cost money before any revenue arrives. ## Diversification: new products in new markets Diversification combines both kinds of newness, which is why it carries the most risk. The [Wikipedia article on diversification](https://en.wikipedia.org/wiki/Diversification_(marketing_strategy)) notes that, unlike the other three paths, it usually needs new skills, technologies and facilities. It comes in degrees: - **Related (concentric):** new products that share technology or know-how with what you do now, sold to different customers. - **Horizontal:** new products for a similar customer base, often through existing channels. - **Conglomerate:** products and markets with little or no link to the current business. Companies diversify for defensive reasons, such as escaping a shrinking market, or offensive ones, such as investing surplus cash in better opportunities. The risks include strain on money and people, distraction for management, and entering markets where you have no advantage. Related diversification and strong controls reduce the risk but do not remove it. ## Comparing the paths step by step - **Write the growth target.** State how much extra revenue or profit you need, and by when. - **List options in every box.** Aim for at least one concrete idea per quadrant, so the team does not jump straight to the most exciting one. - **Size each option.** Estimate the realistic revenue each could add within your time frame. - **Score the newness.** For each option, rate how new the product is to you and how new the market is to you, from 1 (familiar) to 5 (completely new). The total is a rough risk score. - **Name what you lack.** List the skills, licences, partners or capital each option needs that you do not have. - **Choose and stage.** Pick a combination that reaches the target with acceptable risk, and plan small tests before large commitments. ## A worked illustration *An example (illustration only).* An online shop in the UK sells handmade silver jewellery to women aged 25 to 40 and wants to grow revenue by a third within two years. PathOptionNewness scoreMain gap PenetrationRepeat-purchase emails and a gifting service for existing customers2Email skills Market developmentSell the same range to customers in Ireland and the Netherlands5Shipping, returns and local consumer rules Product developmentA men's range for existing customers to buy as gifts5Design and sourcing DiversificationJewellery-making classes for corporate team events9Venue, sales team and a new customer type The owners start with penetration, which is cheap and quick, and run a small test of the men's range with existing customers. They park the classes idea, because it would need a different business model and sales skills they do not have. ## Common mistakes and limits - **Jumping to diversification.** It feels like growth, but it is the box where most knowledge has to be built from scratch. - **Underrating penetration.** Many businesses have room to sell more to customers they already have. - **Treating "new" as new to the world.** What matters is how new the product or market is to your business. - **Ignoring competitors.** Wikipedia's summary notes that the matrix says nothing about how rivals will respond. The matrix has other limits. Critics such as Dawes (2018) have questioned its logic: a product that is new to a firm often takes it into a new market too, which blurs the line between the boxes. The CPA Ireland article points out that real strategic choices sit on a continuum rather than in four separate boxes, and that the matrix on its own gives recommendations little depth. Use it to make sure you have considered all four paths and their relative risk, then test the shortlisted options with market research, a five forces analysis and a financial case.