Chapter 3 RECONSTRUCT MARKET BOUNDARIES Six Paths Framework

Chapter 3 RECONSTRUCT MARKET BOUNDARIES Six Paths Framework Group 4 Raul Guerrero Jose Medina Laura Randall Melissa Dunlop Mona Shafer Alma Pena S

Breaking Away From Competition Look systematically across boundaries

Six Paths Framework § Across Alternative Industries §Across Strategic Groups §Across Buyer Groups §Across Complimentary Products and Service Offerings §Across the Functional-Emotional Orientation of an Industry §Across Time

Path 1: Look Across Alternative Industries Substitutes § § Different Form Same Function Alternatives § § § Different Form Different Function Same Purpose

Creating Blue Oceans Net. Jets § Fractional Jet Ownership NTT Do. Co. Mo’s i-mode § Wireless Transmission of Voice, Text, Data, and Pictures

Path 2: Looking Across Strategic Groups q Companies within a given industry that use similar strategy q Compete on price and performance q Trade up or down from one group to another

Creating Blue Oceans Curves § Combining the industries of traditional health clubs and home exercise programs Lexus § Combine luxury of higher end cars with lower priced vehicles

Path 3: Look Across the Chain of Buyers q Many Industries can create a blue ocean by asking; § What is the chain of buyers in this industry? § Which buyer group does this industry typically focus on? § If the buyer group is shifted how could new value be unlocked?

Target Buyers Vs. Chain of Buyers q Companies tend to focus on the target buyer q In reality there is a chain of “buyers” § Purchaser may be different then actual user § The direct buyer and the indirect buyer may have very different values q Challenging which buyer group to target can create a new blue ocean

Path 3: Look Across the Chain of Buyers q Many Industries can create a blue ocean by asking § What is the chain of buyers in this industry? § Which buyer group does this industry typically focus on? § If the buyer group is shifted how could new value be unlocked?

Path 4: Look Across Complementary Product and Service offer Before, During and After the Storm S

Total Solution q What buyers seek when they choose a product or service? q What happens before, during, and after your product is used? IKEA

NABI q Pain points in transit bus industry § Designs outdated § Late delivery times § Low quality § Penny pinching pricing approach in industry. q Created a value curve that radically differed from the industry's average curve. (Low Life-Cycle Costs) o Named one of the 30 most successful companies in the world by Economist Intelligence Unit in 2002 § Has Captured 20% of the US Market since 1993

Phillips Electronics q In teakettle’s, the major pain point in customers’ total solution was the lime scale found in tap water q Opportunity in the complementary product of water: § Created a kettle having a mouth filter that effectively captured the lime scale as water poured

Creating Blue Oceans q Barnes & Noble q Virgin Entertainment’s megastores q Zeneca’s Salick cancer centers

Path 5: Look Across Functional or Emotional Appeal to Buyers q Industry converge over scope of its products and services q Also on one of two possible bases of appeal § Functional appeal § Emotional appeal

Functional Appeal q Industry competes on price and function largely on calculations of utility q Appeal is rational

Emotional Appeal q Industry competes largely on feelings q Appeal is emotional q Offer many extras that add price without increasing functionality

Path 5: Look Across Functional or Emotional Appeal to Buyers q Companies’ behavior affects buyers’ expectations in a reinforcing cycle § Functionally oriented become more functionally oriented § Emotionally oriented become more emotionally oriented

Path 5: Look Across Functional or Emotional Appeal to Buyers q Challenge the functional-emotional orientation of the industry q Find new market space

Path 6: Look Across Time Assessing Trends Across Time q Three Principles § Decisive § Irreversible § Have a clear trajectory

Identifying a Trend § When a trend is identified, working from the inside out and taking it to its logical conclusion could take a firm into a blue ocean.

Three Takeaways The first principle of blue ocean strategy is to reconstruct market boundaries by looking systematically across different boundaries to break from the competition and create blue oceans. By looking at different angles, such as buyers, products, and services a company can expand its values and break into a blue ocean. Through the perception of time, companies can evaluate the emotional and functional appeal from the buyer’s perspective and create ways to diversify your market space.