Blue Ocean Strategy How to create uncontested market space and make the competition irrelevant 10/8/2017

Authors: Kim & Mauborgne 10/8/2017

Two Worlds….. 10/8/2017

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 10/8/2017

Example: A highly competitive Industry The American Wine Industry

What the industry offers Premium Wines Budget Wines Polarized Strategic Groups Massive Choice

American Wine Industry 3rd 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 10/8/2017

Premium Wines Price Offering Level versus Wine Drinkers’ Expectations Very high High Normal Offering Level versus Wine Drinkers’ Expectations Low Very low Non-existent Price Use of enological terminology and distinctions in wine communication Above-the-line marketing Aging quality Wine range Vineyard prestige and legacy Wine complexity 10/8/2017

Premium and Budget Wines Very high High Normal Offering Level versus Wine Drinkers’ Expectations Low Very low Non-existent Use of enological terminology and distinctions in wine communication Price Above-the-line-marketing Aging quality Wine range Vineyard prestige and legacy Wine complexity 10/8/2017

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) 10/8/2017

Yellow Tail Created a Blue Ocean Creating a Blue Ocean Premium Budget

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. 10/8/2017

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 10/8/2017

Yellow Tail Value Curve “The Essence of a Great Land” Very high High Normal Low Very low Non-existent Fun and adventurous Price Use of enological terminology and distinctions in wine communication Above-the-line-marketing Aging quality Wine range Easy drinking Vineyard prestige and legacy Wine complexity Ease of selection 10/8/2017

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 10/8/2017

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. 10/8/2017

Four Actions to Create a Blue Ocean Raise Eliminate Create Reduce What factors should be raised well beyond the industry standard? Raise What factors should be eliminated that the industry has taken for granted? Eliminate What factors should be created that the industry has never offered? Create What factors should be reduced well below the industry standard? Reduce 10/8/2017

Application of blue ocean strategy to telecom/media industry? 10/8/2017 Application of blue ocean strategy to telecom/media industry? Convergence Strategy Innovative Media Product 10/8/2017