Blue Ocean Strategy: Chapter 3

Blue Ocean Strategy:Chapter 3 Jonathon Jordan, Peter hogue, breann flores,cameron lloyd, and Matthew hord

Trapped in a Red Ocean • Define their industry similarly and focus on being the best within it • Look at their industries through the lens of generally accepted strategic groups, and strive to stand out in the strategic group they play in • Focus on the same buyer group, be it the purchaser, the user, or the influencer

Trapped in a Red Ocean cont. • Define the scope of the products and services offered by their industry similarly • Accept their industry’s functional or emotional orientation • Focus on the same point in time- and often on current competitive threats- in formulating strategy

Breaking Out of the Red Ocean • Break out of the accepted boundaries that define how they compete • Look across the these boundaries • 6 pathways to open up blue oceans

6 Pathways to Blue Ocean • Look across alternative industries • Look across strategic groups within industries • Look across the chain of buyers • Look across complementary product and service offerings • Look across functional or emotional appeal to buyers • Look across time

Path 1: Look Across Alternative Industries • Companies compete not only with its own industry but with other industries that produce alternatives • Every decision that buyers/consumer make unconsciously weighing alternatives • Sellers rarely think about how their customers make trade-offs across alternative industries

Path 1: Look Across Alternative Industries • By focusing on the key factors that lead buyers to trade across alternative industries and eliminating or reducing everything else, you can create a blue ocean of new market space

Look Across Strategic Groups Within Industries • Strategic Group: A group of companies within an industry that pursue a similar strategy • These groups are generally ranked in a hierarchical order by either their price or performance • Mercedes, BMW, Jaguar

Curves • Outcompeted others in their strategic group • Took the best qualities from working out at home and going to the gym • Also made the service available at a lower cost to entice consumers • Profits have exceeded 1 Billion dollars

Look Across the Chain of Buyers • Three different types of people in the chain • Purchaser • Buys products that will eventually be used by the final user. More concerned with cost • User • The final consumer actually using the product. More concerned with ease of use or value. • Influencer • Can sway a user one way or the other when it comes to choosing a product. Ex: Doctor

Creating a Blue Ocean • Firm’s can create Blue Oceans by moving either up or down the chain • For a product that has been primarily focused on purchasers you can add new features to cater to the user • For a user focus you can take a more generalized approach and market your product in bulk to purchasers

Novo Nordisk • A large supplier of insulin in the world market • Supply insulin to purchasers/influencers such as doctors • Decided to go down the chain to users • Created the NovoPen in 1995

Path 4: Look Across Complementary Product and Service Offerings • Few products are used in a vacuum. • Key: • Define the total solution buyers seek when they choose a product or service. • Examples: • Movie theaters, computer hardware, airline industry.

Path 4 Example • NABI • Applied path 4 to the U.S. bus industry • Companies competed to offer lowest purchase price • Issues: • Design, delivery, and quality. • Discovered highest-cost element wasn’t the price of the bus

Path 4 Example • NABI • Created a bus unlike any other • Adopted fiberglass instead of steel • Cut costs of maintenance, body repairs were faster and cheaper, buses were more environmentally friendly • Lower life-cycle cost, higher price charged

Path 4 Example • Barnes & Noble and Borders • Redefined scope of services they offer • Don’t just sell books • Two largest bookstore chains in the U.S.

Path 4 Key Questions • What is the context in which your product or service is used? • What happens before, during, and after? • Can you identify the pain points? • How can you eliminate these pain points through a complementary product or service offering?

Bases of Appeal • Rational • Price • Function • Emotional • Feelings

Functional or Emotional • Functional • Add emotion • Emotional • Higher price • Less funtionallity

Swatch • Watch industry • Functionally driven

Quick Beauty House • 1996 • Tokyo, Japan • 57,000 visitors • 2003 • 200+ • 3.5 million annually

Japanese Haircut Traditional QB House 10 minutes Less rituals 1,000 yen $9 • 1 hour • Long process • 3,000 – 5,000 yen • $27 – $45

Mexico • Added emotion • Used traditions

Path 6: look across time • Industries external trends that affect their business • Managers tend to focus on projecting the trend itself • Key to blue ocean strategy comes from how the trend will change value to customers and impact the companies business model

Three principles to asses trends across time • Trends must be decisive to your business • They must be irreversible • They must have a clear trajectory • The 1998 mounting Asian crisis • -Big impact on the financial services

The European currency • Replaces the need for multiple currencies • Its decisive, irreversible, and clearly developing trends in financial services • Perfect example of blue ocean which is why the European union continues to enlarge

Apple observing the trend • Apple observed the trend of the flood of illegal music file sharing in the late 1990’s • By 2003 on average of 2 billion music files were being traded each month. The trend toward digital music was clear • This trend was evident that people wanted mp3 players that played mobile digital music

Creation of ITunes • Agreement with 5 major music companies ITunes was launched in 2003 • It offered legal easy to use song downloads • It allowed you the ability to purchase individual songs rather than a cd • The sound quality is a huge upgrade from illegal downloading cites • Unique features such as top billboard songs, best love songs etc. • Under iTunes artists receive 65% of purchase price

Cisco systems • Created a new market space by thinking across time trends • The growing demand for high speed data exchange • Cisco’s routers, switches, and other networking devices were designed to create breakthrough value for customers: • Offering fast exchanges in a seamless environment

QUESTIONS?????

Blue Ocean Strategy: Chapter 3