Returning to the wisdom of Michael Porter, one of his key insights was recognizing that all of companies activities are ultimately directed to its products and markets. He recognized that you could effectively identify the strategy of any company by looking at how it will change the products it sells and the markets it will sell to. From this he concluded that the most fundamental strategic question is "What should the scope of our products and markets be?"
One of the best ways to represent this is with an 'extended Ansoff matrix.' An example of this is shown in figure 3. The diagram has a number of different rows, each of which represents a group of products or services. How you group your products and services together is entirely your own decision. There should be enough groups to make the analysis useful, but not so many that it becomes unwieldy.
We then have a number of different columns, each of which represents a particular market segment or group of customers. In some extreme situations one: can in fact represent one particularly large or valuable customer with its own column. Again how you divide and segment your markets is entirely up to you. Look for the market segments to be autonomous, in other words not overlapping each other. Markets can segmented in different ways - examples include segmenting by region, age or by customer value.
Products and services divide into three types. You have current products, modified products and new products. The market divides in a similar way, so that you have the markets that you currently serve, extended markets that you could move into and indeed new markets. The matrix now divides into what are called product market cells. In the example here, three current product groups and three current market segments give us nine product market cells. These are the ones in the top left of the diagram and represent our current business.