Blue Ocean Strategy

1. Blue Ocean Strategy Chapter 2: Analytical Tools and Framework Group 6: Landon Cotham Knowl Richardson Amber Morris Katy Martin Maddie Ramsey Dustin Eggleston

2. Tools For Success • Red Ocean- Five forces of competition analysis and three generic strategies • GM’s Five Forces: • Threat of new entrants- low • Bargaining power of suppliers- very low • Bargaining power of buyer- moderate-high • Threat of substitute products- very few • Intensity of rivalry- very strong

3. Tools For Success • Blue Ocean • Strategy Canvas • Four Actions Framework • Eliminate-Reduce-Raise-Create Grid • Three Characteristics of a Good Strategy • Risk Minimization

4. Strategy Canvas for Blue Ocean Strategy • Twopurposes: • Captures current state of play in known marketplace • Shows principal factors important to the industry • Graphic form: • Horizontal axis: range of factors the industry competes on • Vertical axis: offering level that buyers receive across all factors

5. U.S. Wine Industry • Top 8 companies have 75% of market • Other 1600 companies have 25% • Top companies offer high values in each principle factor • Shift strategies from competitors to alternatives, and customers to noncustomers

6. Wine Industry GM – auto industry curve is similar to this example

7. GM’s Principal Factors • Price • Gas Mileage • Technology- OnStar • Range of Products- Cars, Trucks, SUVs • Ease of Service • Reliability of Products

8. Southwest Airlines

9. Four Actions Framework • Fourkey questions in order to make a new value curve • Which factors the industry takes for granted should be eliminated? • Which factors should be reduced well below the industry standard? • Which factors should be raised well above the industry standard? • Which factors should be created that the industry never offered?

10. Effects of Four Actions Framework • The four questions make companies raise/lower values and costs • Yellow Tail became a distinct product of Casella Wines • Served wine enthusiasts and other alcoholic beverage consumers

11. Eliminate-Reduce-Raise-Create Grid • The third tool that is key to the creation of blue oceans

12. Yellow Tail

13. Three Characteristics of a Good Strategy • The new values offered a product different from the competition. • Their three key qualities: • Focus • Divergence • Good Tagline • Examples: Yellow Tail, Southwest Airlines

14. Focus • Shown by the points on the value curves • Where the company puts its money • Shows company’s strengths and weaknesses • Yellow Tail does not diffuse its efforts across all key factors of competition

15. Divergence • Values vary from competitors by eliminating, reducing, raising, and creating • Offers a product different from rest of industry targeting more consumers • Southwest pioneered point-to-point travel as opposed to traditional hub-and-spoke systems

16. Tagline • Clear cut- Tells what the company is looking to accomplish in simple language • Compelling- Grabs the attention of the audience and interests them • True- Must be a reasonable statement that can be achieved or people won’t acknowledge it. • Yellow Tail: “A fun and simple wine to be enjoyed every day.”

17. Value Curve Advantages • Strategy Canvas enables companies to see the future and the present • Companies in Red Ocean- Have similar curves, try to outdo each other yielding no growth • Ex: General Motors

18. Ineffective Strategies • OverdeliveryWithout Payback- High values in all sections of core values, overdelivery without payoffs • Internally Driven Company- Think about themselves instead of customer • Ex: Wine companies using confusing language on bottles

19. Ineffective Strategies • Incoherent Strategy- Company’s values show no purpose, have no vision, random values • Strategic Contradictions- Investing in a core factor without support for it • Ex: Investing in company website without upgrading the site’s speed of operation

20. Summary • Strategy Canvas • Four Actions Framework • Eliminate-Reduce-Raise-Create Grid • Three Characteristics of a Good Strategy