IB Business Management SLTopic 8 — The Pre-Released StatementPaper 1Toolkit~10 min read
Bringing the Ansoff Matrix Into Your Answers
Ansoff answers one question: if a business wants to grow, where should it grow? Four routes, rising in risk. ABC is unusual because it has already jumped to the riskiest one by accident, which gives you a lot to argue about.
What you need to know
Ansoff sorts growth by two things: existing or new product, and existing or new market.
Market penetration is the safest: sell more of what you have to who you already sell to.
Diversification is the riskiest: new product, new market, no experience of either.
ABC has already diversified by moving into e-waste, and it did so by chance.
Its home market is capped — it is already the largest concrete producer in Country Z.
The strategies are not independent: concrete profits are what pay for e-waste expansion.
The four routes, applied to ABC
Notice the bottom-left box. Recycled aggregate concrete is the option that uses everything ABC already has.
Market penetration: the safe starting point
Sell more of the same concrete to the same construction firms. ABC could do this by cutting production costs, winning longer contracts with developers and governments, or promoting its existing concrete as the more sustainable choice.
The problem is a ceiling. ABC is already the biggest producer in Country Z, and concrete markets are local and price-sensitive. There is only so much share left to take. What penetration does do is generate the cash that funds the riskier routes, which is why it usually belongs in your answer even when it is not the recommendation.
Product development: the natural fit
New products for the customers ABC already has. Two stand out:
Concrete made with recycled aggregates. Crushed old concrete replacing quarried stone. It uses ABC’s existing expertise, feeds its environmental goal and links both halves of the business.
Low-carbon concrete. Attractive to public projects that increasingly demand sustainable materials.
The counter-argument is standards. Construction materials must pass strict safety testing before builders will use them structurally, so approval takes time and money.
Market development: the expensive one
Selling existing products to new customers. ABC could take concrete abroad, or sell recovered metals to electronics manufacturers rather than only to jewellery makers.
Watch the physics. Concrete is heavy and starts to set, so it cannot be shipped far. Expanding geographically means building new plants, not exporting. That turns market development into a large capital investment, which is why it is riskier here than it would be for, say, a software firm.
Diversification: already happened
ABC did not plan this. Scientists working on something else found a way to recover gold, and by 2024 the company had opened an e-waste factory and picked up a customer group with no connection to construction.
That is genuine diversification: new product, new market, different suppliers, different regulations, different risks. It is the riskiest quadrant, and the honest evaluation is that ABC arrived there by luck rather than strategy — which is a reason to be cautious about assuming it can repeat the trick.
Examiners like the phrase “related diversification” here, because recycling and construction materials share a sustainability story. Use it, but then push back: sharing a story is not the same as sharing expertise.
Which route should ABC take?
Route
The case for it
The case against it
Market penetration
Lowest risk, supports the stated efficiency goal, and generates cash to fund everything else.
ABC is already the market leader, so there is little share left to win.
Product development
Recycled aggregate concrete combines concrete expertise with recycling knowledge and supports the environmental goal.
New mixes must meet strict construction standards, and customers may be slow to trust them.
Market development
Reduces dependence on a single national market where growth is limited.
Requires building new plants abroad, plus unfamiliar regulations and business practices.
Diversification
The e-waste opportunity is enormous, with most of the world’s supply still unrecycled.
Riskiest quadrant, revenue depends on metal prices, and ABC has little experience.
WORKED EXAMPLE
Explain why ABC’s move into e-waste processing is an example of diversification. [2]
Step 1: the point
Diversification means selling a new product into a new market, so the business is operating outside both its existing product range and its existing customer base [1]
Step 2: apply itABC previously made only concrete for construction firms, but it now recovers gold from circuit boards and sells it to jewellery makers, who are not construction customers at all [1]2 marksBoth halves matter. Say new product AND new market, or you have only defined half the box.
WORKED EXAMPLE
Discuss whether product development is a better growth strategy for ABC than further diversification. [10] — the plan
Opening
Define both strategies using Ansoff, and say what ABC’s stated goals are: efficiency, lower environmental impact and growth.
The case for product development
Recycled aggregate concrete sells to existing customers, so no new market to learn. It uses concrete expertise ABC already has. It directly supports the environmental goal and a circular business model.
The case for further diversificationThe e-waste market is vast and mostly untapped. Margins on recovered metals can be high. ABC already has a technological edge with its room-temperature process.The case against eachNew concrete mixes face strict safety approval. Further diversification stretches management across two very different industries and exposes ABC to metal price swings.The judgement
Product development is the better next step because it is lower risk and uses existing strengths. But say what it depends on: whether recycled mixes can pass construction standards, and whether concrete profits stay strong enough to fund either route.
Both sides, a decision, and the condition it rests onNever argue that one route replaces the other. ABC needs penetration cash to afford anything else.
Exam tip
Name the quadrant. “This is market development” is an analysis mark for four words.
Check both axes. New product only? That is product development, not diversification.
Use risk as your evaluation spine. Ansoff is a risk ladder, so rank the options by it.
Remember concrete profits fund the rest. The strategies are interdependent, and saying so shows real understanding.
Recycled aggregate is your strongest example. It sits neatly in product development and links to the circular model.
Do not recommend everything. A judgement picks one and explains why the others come second.
Common mix-up
Calling any new activity diversification. Only if the product and the market are both new.
Treating market development as easy. For heavy products it means building plants, not just selling further away.
Forgetting ABC has already diversified. The question is usually what comes next, not whether to start.
Assuming riskiest means worst. Diversification carries the highest risk and the highest potential return.
Ignoring the ceiling on penetration. Being the market leader already limits how much more share there is.
Drawing the matrix and stopping. The grid is planning; the marks are in the argument.
Up next: Bringing Decision Trees Into Your Answers — how to put numbers on a choice, and the step almost everybody forgets.
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