Blue Ocean Strategy Chapter 3: Reconstruct Market Boundaries Team 6 Morgan Boone Brodie Calley Carter Hewlett Austin Hinkle Nailah Jones

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What companies tend to do Define their industry Look at the industries through strategic groups and try to stand out in the ones they play in Focus on the same buyer group whether it be purchaser, user, or influencer. Define the scope of the products and services offered Accept their industry’s functional or emotional orientation Focus on the same point in time in formulating strategy.

The six assumptions mentioned in the previous slide are the assumptions that most companies tend to build their strategies upon By sticking to these assumptions, companies are trapped in competing in red oceans When the the enhanced alternatives are applied, competing in a blue ocean becomes realistic

Overview: 6 Paths Framework 6 basic approaches to remaking market boundaries Clear patterns for creating blue oceans Doesn’t require special vision about the future, all focus on looking at familiar date from a new perspective

The 6 Paths 1. Alternative Industries 2. Strategic Groups 3. Buyer Groups 4. Complementary Product and Service Offerings 5. Functional-Emotional Orientation of an Industry 6. Time

Path 1: Look Across Alternative Industries Substitutes Product or services with different forms, but the same functionality Alternatives Products or services with different functions, but the same purpose NetJets

Strategy Canvas of NetJets

How this can help Academy Rather than focusing on similar products, substitutes, market to new customers with new products, alternatives

Path 2: Look Across Strategic Groups Within Industries Strategic Groups “A group of companies within an industry that pursue a similar strategy” Strategic groups can usually be ranked based on two dimensions: 1. Price 2. Performance Each jump in dimension tends to include a corresponding jump i.e. as price increases, performance should increase as well

Companies try to compete within their strategic groups Mercedes doesn’t focus on competing with Ford, but they do focus on outcompeting Jaguar Companies can create a Blue Ocean by understanding why consumers “trade up” or “trade down” Lexus offered the quality of a high-end Mercedes, but at the price of a lower-end Lincoln

Curves Curves began franchising in They based their strategy on why Women trade up to a health club, or trade down to a home workout tape. By cutting out all of the extras, they created an affordable fitness club that was just a fast as a home workout.

Path 3: Look Across the Chain of Buyers In most industries, competitors can agree on a common definition of who the target buyer is for that industry In reality, there is a series of “buyers” who are directly or indirectly involved in the buying decision Three groups are involved in the buying process Purchasers Users Influencers The “purchasers” of the product, who pay for it, may differ from the products actual “users”. There can also be important “influencers” of the product as well

Individual companies in an industry often target different segments of customers, but they typically end up targeting a single buyer group Challenging an industry’s conventional approach to targeting customers can lead to the discovery or creation of a Blue Ocean By looking across buyer groups, companies can gain new insights about how to re-evaluate their strategies to target previously overlooked sets of buyers

Example Insulin Pens Typically directly sold and marketed to Doctors Started marketing towards the end consumer Created a new product/business (NovoPen) By questioning conventional definitions of who can and should be the target buyer, companies can often see new and vastly different ways to create or unlock value

Path 4: Look Across Complementary Product and Service Offerings Untapped value is often hidden in complementary products and services Think about what happens before, after, and during the product/service being used Expedia allows you to book your airline ticket, hotel, and rental car at the same time The majority of travelers need these accommodations when they travel

Admit Two? If you and your significant other wanted to see a movie, what services might make this easier? Although childcare is not included in the price of a movie ticket, nor is it part of the theatre experience, the ease of finding a babysitter affects the perceived value of going to the movies

Pain Points Identify potential “pain points” your customer may experience, and try to alleviate them prior Obtaining a hunting license can be done at Academy This alleviates the pain point of the customer having to buy their hunting gear at Academy and then having to go somewhere else to get the approved license Eliminates extra steps in the purchasing process

NABI A Hungarian bus company Realized that the key expenses in public transportation (busses) was not in the initial purchase, but in the repairs When busses were well repaired, they also ran on time and customers were happier with the experience

Fiberglass Lower powered engines More Space inside of bus Steel Hard to repair Less Spacious

Path 5: Look Across Functional or Emotional Appeal to Buyers Companies in similar industries tend to compete based on one of two appeals 1.Some industries compete principally on price and function, largely on calculations of utility Their appeal is considered to be rational 2. Others choose to compete largely on feelings associated with their product/service Their appeal is emotional The appeal of most products or services is rarely intrinsically one or the other

Over time, functionally oriented industries tend to become more functionally oriented and emotionally oriented industries become more emotionally oriented When companies are willing to challenge the functional-emotional orientation of their industry, they often find new market space

Emotionally Oriented Industries Offer many extras that add price without enhancing functionality By removing those extras, there is the possibility to create fundamentally simpler, lower-priced, lower-cost business models that customers would welcome Functionally Oriented Industries Can often give their products new life by incorporating elements of emotion In doing so, they can stimulate new demand

A burst of Blue Ocean creation is becoming prominent in a number of service industries, but in the opposite direction Many of them are moving from an emotional orientation to a functional orientation

Application to Academy Sports and Outdoors Academy competes on functionality Offers a wide range of products at affordable prices By adding in emotional appeals, such as family bonding while using their sports and outdoors products, or building comradery within a team, the brand would be associated with more than just tangible products

Path 6: Look Across Time All industries are subject to external trends Insights come from how the trend will change value to customers This approach is more difficult than the previously discussed approaches

Apple and iTunes An example of this is Apple launching iTunes in ’s the market was flooded with illegal music file sharing Allowed customers to buy individual song iTunes was a huge success Average 2.5 million downloads per week Apple’s iTunes unlocked a blue ocean in digital music

Summary: Conceiving New Market Space By thinking across conventional boundaries of competition, you can see how to make convention- altering, strategic moves that reconstruct established market boundaries and create Blue Oceans By considering the restructure of existing market elements across industry and market boundaries, firms will be able to free themselves from the head-to-head competition in red oceans