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6cal Academic Article May 2016
6cal Academic Article May 2016
CORPORATE LENDING
By Tony Dennant
Is the Ansoff Growth Matrix the answer in a lending scenario?
When considering a corporate lending proposition such as that in Question 1 of the
Corporate Lending exam paper, there are a number of models or structures that can
assist the analysis. These could include Porter’s Five Forces, SWOT analysis and
PESTEL, and these are all very valid tools to assist the analysis of the proposition.
This article looks at one of the less-used models – the Ansoff Growth Matrix – and
considers how suitable it is within a lending proposition.
The matrix identifies four growth strategies that a firm could follow:
• Market penetration – where within the existing markets, the firm looks for
further product penetration that will increase its market share on the same
product or service.
• Market development – where the firm sells its existing products or services
into new market segments and/or geographical regions.
• Product development – where the firm develops new products and/or
services in its existing markets.
• Diversification – where the firm looks at growing into both new products or
services, and new markets.
Summary
The matrix clearly has a place in the lending analysis of a proposition, but it is likely
to be a complementary one in addition to other tools such as Porter’s Five Forces,
SWOT, PESTEL, etc.
The matrix is particularly useful for reviewing the business strategies of the firm that
is requesting the lender’s support for expansion or growth.
The analysis may cover some key strategic questions for the business, including:
• Which business/market is the firm in and which business/market does it
intend to be in? How will the proposed lending assist in achieving this aim?
• What are the firm’s specific products/services that give it a competitive
advantage and where will it look to sell these?
• Which of Ansoff’s options for growth is the firm intending to use and is it
justified?
• With each of the questions above, what are the risks and the potential
rewards – and are they likely to lead to the success anticipated?
• Finally, does the strategy chosen fit with the firm – for example, do they have
the skills and expertise to deliver the growth strategy?
Reference
Ansoff, I. (1957) Strategies for Diversification. Harvard Business Review, 35 (5),
Sep–Oct 1957, p113–124.
Further reading
Cilley, J. (2011) A Road Map for Growing Your Business. Business NH Magazine,
Oct 2011, 28 (10), preceding p32–32, EBSCOhost: Business Source Corporate Plus
[online]. Available through ifs KnowledgeBank website at:
http://search.ebscohost.com/login.aspx?direct=true&AuthType=url&db=plh&AN=668
19385&site=ehost-live [Accessed: 6 May 2016].
Richardson, M. and Evans, C. (2007) Strategy in action applying Ansoff's Matrix.
British Journal of Administrative Management, Summer 2007, 59, pi-iii, EBSCOhost:
Business Source Corporate Plus [online]. Available through ifs KnowledgeBank
website at:
http://search.ebscohost.com/login.aspx?direct=true&AuthType=url&db=plh&AN=270
19121&site=ehost-live [Accessed: 6 May 2016].