Blue Ocean Strategy How to create uncontested market
Blue Ocean Strategy How to create uncontested market space and make the competition irrelevant 9/26/2020 1
Authors: Kim & Mauborgne 2 9/26/2020
Two Worlds…. . 3 9/26/2020
Red Ocean & Blue Ocean Red Ocean Strategy Blue Ocean Strategy Compete in existing market space. Create uncontested market space. Beat the competition. Make the competition irrelevant. Exploit existing demand. Create and capture new demand. Make the value-cost trade-off. Break the value-cost trade-off. Align the whole system of a strategic firm's activities with its choice of differentiation or low cost. Align the whole system of a firm's activities in pursuit of differentiation and low cost. VALUE INNOVATION 4 9/26/2020
Example: A highly competitive Industry The American Wine Industry 5
What the industry offers Premium Wines Budget Wines Polarized Strategic Groups Massive Choice 6
American Wine Industry § 3 rd largest in world: worth $20 billion § Californian makes 66% - the rest is from Italy, France, Spain, Chile, Argentina, Australia § Exploding number of new wines – new vineyards in Oregon, Washington, New York § Customer base stagnant 9/26/2020 7
9/26/2020 8 ice Pr Us ter e of dis min eno co tinc olog logi ca mm tio y a l n n un s d ica in tio win n e Ab ma ove rk -th eti eng lin e Ag ing qu Vin ali ty e an ya d l rd eg p ac res y tig e Wi ne co mp lex ity Wi ne ra ng e Offering Level versus Wine Drinkers’ Expectations Premium Wines Very high High Normal Low Very low Nonexistent
9/26/2020 9 ice Pr ge ne ra n Wi Us ter e of dis min eno co tinc olog logi ca mm tio y a l n n un s d ica in tio win n e Ab ma ove rk -th eti eng lin e. Ag ing qu Vin ali ty e an ya d l rd eg p ac res y tig e Wi ne co mp lex ity Offering Level versus Wine Drinkers’ Expectations Premium and Budget Wines Very high High Normal Low Very low Nonexistent
What people said. . . “It is too confusing and complex” – Wine descriptions and terminology – The shopping experience – The lack of clear guidance on what to buy and drink Thus, massively intimidating for ‘noncustomers’ (the large majority of the US population who were not wine drinkers) 9/26/2020 10
Yellow Tail Created a Blue Ocean Premium Creating a Blue Ocean Budget 11
Yellow Tail § Only 2 types initially – Chardonnay and Shiraz § Fruity, soft on palette, sweet-ish – great for those who had not drunk wine before § Same bottle for red and white – low logistics costs § Simple vibrant packaging – lower case letters/kangaroo § Australian clothing for the retail staff – they enthusiastically promoted a wine they could understand. 9/26/2020 12
Yellow Tail Strategy § Eliminated: Enological terminology and distinctions, Aging qualities, Above the line marketing § Reduced: Wine complexity, Wine range, Vineyard prestige § Raised: Price versus Budget Wines, Simplicity of retail store environment, Enthusiasm of Sales People § Created: Easy drinking, Ease of selection, Sense of fun and adventure 9/26/2020 13
Nonexistent 9/26/2020 14 ice Pr s Fu ad n an ve d ntu ro u n cti o g dr ink in se of se le Ea Ea sy an ge ne r Wi Us ter e of dis min eno o l t om inct logy ogic mu ion an al nic s in d ati wi on ne Ab ma ove rk -th eti eng lin e. Ag ing qu Vin ali ty e an ya d l rd eg p ac res y tig e Wi ne co mp lex ity Yellow Tail Value Curve Very high “The Essence of a Great Land” High Normal Low Very low
Results No 1 imported wine (outsells France and Italy) Fastest growing imported wine in the history of the USA industry – New consumers of wine – Jug drinkers trade up – Premium wine drinkers trade down 9/26/2020 15
Summary Conventional Logic Blue Ocean Logic Industry Assumption Industry conditions are given Industry condition can be shaped. Strategic Focus Build competitive advantages to beat the competition. Create a quantum leap in buyer value to dominate the market. Customers Retain and expand the customer base through further segmentation and customization. Go for the mass of buyers and willingly let some existing customers go. 9/26/2020 16
Four Actions to Create a Blue Ocean Raise What factors should be raised well beyond the industry standard? Eliminate Create What factors should be eliminated that the industry has taken for granted? What factors should be created that the industry has never offered? Reduce What factors should be reduced well below the industry standard? 9/26/2020 17
Application of blue ocean strategy to telecom/media industry? q Convergence Strategy q Innovative Media Product 9/26/2020 18
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