1. Blue Ocean Strategy
How to create uncontested market space and make the competition irrelevant
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2. Authors: Kim & Mauborgne
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3. Two Worlds…..
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4. 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
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5. Example: A highly competitive Industry
The American Wine Industry

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

7. 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
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8. 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
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9. 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
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10. 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)
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11. Yellow Tail Created a Blue Ocean
Creating
a Blue Ocean
Premium
Budget

12. 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.
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13. 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
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14. 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
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15. 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
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16. 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.
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17. 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
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18. Application of blue ocean strategy to telecom/media industry?
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Application of blue ocean
strategy to telecom/media
industry?
Convergence Strategy
Innovative Media Product
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