Strategists also need to choose how to grow. The Ansoff Matrix plots growth options across new versus existing products and new versus existing markets, yielding four cells. Market penetration grows sales of current products to current markets, often through pricing, promotion, or distribution. Market development takes existing products to new geographies, segments, or use cases. Product development creates new offerings for existing customers by leveraging known relationships and channels. Diversification introduces new products to new markets, increasing both risk and potential reward. Diversification can be related - leveraging visible linkages like shared technology or channels between the new and existing business - or unrelated, spreading bets across businesses with little operational linkage, primarily as a financial-portfolio logic. Underneath these choices sits the business model, which specifies how a firm creates, delivers, and captures value for its stakeholders. Business model innovation is the redesign of how value is created, priced, delivered, or captured, often beyond product or service changes.
Platforms have emerged as a distinct and powerful business model. A platform strategy connects producers and consumers of complementary value, capturing value through network effects and governance. Network effects are the phenomenon where a product or service becomes more valuable as more people use it. Direct network effects occur when more users of one side make the product more useful for all users, while indirect (cross-side) network effects arise when growth on one side makes the platform more valuable for users on the other side. A two-sided market serves two distinct user groups whose participation jointly creates value for the other. When combined with switching costs, network effects can produce winner-take-all markets, where value concentrates in one or a few players because rivals find it hard to bootstrap an alternative.
Firms must also decide what to do within the value chain. Vertical integration expands the firm's scope into upstream suppliers or downstream channels to control more of the value chain, while horizontal integration consolidates competitors or peers to gain scale, share, or capabilities in the same layer. Make-versus-buy decisions weigh the long-term cost and capability implications of producing an activity in-house versus sourcing it externally, and the outsourcing risk is that it can erode in-house capability, create vendor dependency, and reduce strategic flexibility over time. A useful organizing frame is the core versus context distinction: core activities protect the strategic advantage and should usually stay close to the organization, while context activities are candidates for outsourcing, automation, or simplification. A strategic partnership is an agreement where firms combine capabilities to pursue goals neither can reach efficiently alone, sometimes producing coopetition - the simultaneous cooperation and competition between firms that partner in some areas while competing in others. A merger of equals combines two similarly sized firms under shared governance, framed as a partnership rather than acquisition.