Resume Blue Ocean Strategy

TUGAS MANAJEMEN STRATEGIK BLUE OCEAN STRATEGY

Oleh : 1. Winda Harviyanti Anandita 2. Diah Ayu K. 3. Mayadhanissa A. S. D.

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Program Studi : S1 Akuntansi / Kelas : L Fakultas Ekonomi dan Bisnis Universitas Airlangga Surabaya 2015 BLUE OCEAN STRATEGY

By W. Kim Chan

Creating Blue Oceans

New Market Space Red oceans and blue oceans make up market universe Red oceans: all industries in existence = known market space Blue oceans: all industries not in existence = unknown market space Red oceans • • • • • • Blue • • • • •

Industry boundaries defined and accepted Competitive rules of game known Companies try to outperform rivals; cutthroat competition As market space gets crowded, prospects for profit and growth reduced Products become commodities Red ocean strategy is a market-competing strategy oceans Undefined market space, demand creation, opportunity for highly profitable growth Most are created from within red oceans by expanding existing industry boundaries Rules of game waiting to be set Competition irrelevant Blue ocean strategy is a market-creating strategy

The Rising Imperative of Creating Blue Oceans • • • • • • •

Supply is exceeding demand in most industries global competition is intensifying Problems: Accelerated commodization of products and services Increasing price wars Shrinking profit margins Red oceans becoming bloodier, need to be concerned with creating blue oceans

The Continuing Creation of Blue Oceans • • • • • •

Blue oceans have been around for some time; a feature of business life Industries never stand still, constantly evolving Significant expansion of blue oceans over years So why the focus on red ocean strategy? Corporate strategy influenced by military strategy Need to create new market space that is uncontested

The Impact of Creating Blue Oceans

The Profit and Growth Consequences of Creating Blue Oceans Red Oceans Blue Oceans Profit Impact Revenue Impact Business Launch

39

61 62

38 86

14

From Company and Industry to Strategic Move • • • •

Are there lasting visionary companies that continuously outperform the market and create blue oceans? Found success of these model companies was a result of industry sector performance, not companies themselves Strategic move used as unit of analysis (rather than company or industry) Strategic move: the set of managerial actions and decisions involved in making a major market-creating business offering

Value Innovation: The Cornerstone of Blue Ocean Strategy • •

Creators of blue oceans follow value innovation Value Innovation

– – –

Equal emphasis on value and innovation Defies value-cost trade-off of competition-based strategy Successful value innovation: • Drives down costs while driving up buyers’ value • Uses a whole-system approach • Follows reconstructionist view

Red Ocean Vs. Blue Ocean Red Ocean • Compete in existing market space • Beat the competition • Exploit existing demand • Make the value-cost trade-off • Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost Blue Ocean • Create uncontested market space • Make the competition irrelevant • Create and capture new demand • Break the value-cost trade-off • Align the whole system of a firm’s activities in pursuit of differentiation and low cost Formulating and Executing Blue Ocean Strategy • • • • • • • •

Six Principles of Blue Ocean Strategy Reconstruct market boundaries Focus on the big picture, not the numbers Reach beyond existing demand Get the strategic sequence right Overcome key organizational hurtles Build execution into strategy The remaining chapters will give you the principles and generalized frameworks to succeed in blue oceans

Take Aways

• • •

Red ocean strategy is a market-competing strategy, while blue ocean strategy is a market-creating strategy As red oceans are becoming bloodier, we need to create more blue oceans “The only way to beat the competition is to stop trying to beat the competition!”

The Six Principles of Blue Ocean Strategy Formulation Principles

Reconstruct market boundaries Focus on the big picture, not the numbers Reach beyond existing demand Get the strategic sequence right Evaluation principles

Overcome key organizational hurdles Build execution into strategy

Risk factor attenuates

  

principle

Search risk Planning risk Scale risk Business model risk

Risk factor attenuates  

each

each

principle

Organizational risk Management risk

Points of view • • •

Business often look at the industry from a structuralist (supply) point of view What if we looked at the industry from a reconstructionist (demand) point of view? Market boundaries are not viewed as given, but could be reconstructed to unlock new demand

Generic Strategies vs. Value Innovation

Example: A highly competitive Industry The American Wine Industry

Premium WinesBudget Wi Polarised Strategic Groups

Massive Choice • • • • • • •

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 Top 8 producers had 75% of the market; 1600 had the remaining 25% $ millions spent in marketing - Titanic battles – intense competition Sever price pressure The dominant growth strategy was towards premium wines – more complexity, better image, more prestigious vineyards, number of medals won at wine festivals.

What wine customers 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)

Segmentation of Market and Brands Low Involvement

High Involvement

Easy Going

Enjoyers

Aspirationa ls

Glass friends

Everyday enjoyment

Image important

Want to discover Sophisticated wine drinker

To relax/unwind

Wine preferrers (sic)

Knowledge of wine Discerning wine regions tastes

with

Least care choosing a wine Not wine preferrers

Stick with limited list of known brands

Varietal knowledge

Appreciators

Frequently >$10 wines

buy Don’t decide in store

Join wine clubs Price is strong influencer

a

Choose store

in-

Not interested in wine language Influenced by major brand advertising

Interested in some wine Don’t stick language known brands Enjoy trying Ideal wine new wines complex interesting Visit wineries / read wine articles

Brand:

Lindemans

Rosemount Estate

Wolf Blass

Demographi c:

M/F: 50/50 Age: 35-49

M/F: 30/70; M/F: 70/30; Age: 30-40 35-50

Connoisseurs

Have a cellar to Less influenced by specials/ promotions is & Actively pursue wine knowledge

Penfolds Age: Age: 40+

Strategy Canvas The strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. It captures the current state of

play in the known market space. This allows you to understand where the competition is currently investing, the factors the industry currently competes on in products, service, and delivery, and what customers receive from the existing competitive offerings on the market. The horizontal axis captures the range of factors the industry competes on an invests in. The vertical axis captures the offering level that buyers receive across all these key competing factors. The value curve then provides a graphic depiction of a company’s relative performance across its industry’s factors of competition.

1. Visual Awakening

2. Visual Exploration

3. Visual Strategy Fair

4. Visual Communication

Compare your business with your competitors’ by drawing your “as is” canvas

Go into the field to explore the six paths to creating blue oceans

Draw your “to be” canvas based on insights from field observations

Distribute your before-and-after strategic profiles on one page for easy comparison

See where your strategy needs to change

Observe the distinctive advantages of alternative products and services See which factors you should eliminate, create or change

Four Steps of Visualizing

Premium Wines

Budget Wines

Get feedback on alternative strategy canvases from customers, competitors’ customers, and noncustomers Use feedback to build the best “to be” future strategy

Support only those projects and operational moves that allow your company to close gaps and actualize the new strategy

Price

Wine range Above-the-lineVineyard marketing prestige and legacy Aging quality Wine complexity

Four Actions to create a Blue Ocean

Four Actions Framework + Eliminate/Reduce/Raise/Create Grid The four actions framework offers an technique that breaks the trade-off between differentiation and low cost and to create a new value curve. It answers the four key questions of what industry takes for granted and needs to be eliminated; what factors need to be reduced below industry standards; what factors need to be raised above industry standards; and what should be created that the industry has never offered. Reduce

Which factors should be reduced well below industry standards?

Eliminate

A New Value Curve

Create

factors should be created that the industry has nev Which of the factors that the industry takes forWhich granted should be eliminated?

Raise

Which factors should be raised well above the industry’s standard?

The eliminate-reduce-raise-create grid pushes companies not only to ask all four questions in the four actions framework but also to act on all four to create a new value curve. By driving companies to fill in the grid with the actions of eliminating, reducing, raising, and creating, the grid provides four immediate benefits: it pushes them to simultaneously pursue differentiation and low costs; identifies companies who are only raising and creating thereby raising costs; makes it easier for managers to understand and comply; and it drives companies to scrutinize every factor the industry competes on. ERRC Grid yellow tail

Case of yellow tail Eliminate

Raise

Enological terminology & Price versus budget distractions wines Aging qualities Above-the-line marketing

Retain involvement

store

The Reduce

Create

Wine complexity

Easy drinking

Wine Range

Ease of selection

Vineyard prestige

Fun & adventure

To Be Canvas •

Eliminate

•

Reduce

•

Raise

•

Create

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 Un-intimidating They were selling “The essence of a great land … Australia” – ie they were not selling the wine Australian clothing for the retail staff – they enthusiastically promoted a wine they could understand.

Value Innovation of [yellow tail]

• •

Utility proposition (customers, distributors and retailers)

• •

• •

Creating of a social drink that is accessible to anyone Easy drinking, ease of selection, sense of fun and adventure Limit number of SKUs Price to move at volume

Targeted at the mass of Results customers • Priced against the alternative • No 1 (6-pack) imported wine • Elimination of working capital • Cost (outsells tied up in aging wines structure France • Fast product turnover 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 • Industry criticizes them mercilessly at first •

Price proposition

•

Key Takeaways Three tiers of non-customers: 1: buyers who purchase your industry offerings out of necessity; will jump ship if given an opportunity. 2: buyers who purchase alternative offerings that serve the same function

3: people who don’t consume even the alternatives to your offerings Non-customer demand is unlocked by providing new buyer utilities, at a price that attracts a mass of buyers, given target costs. Buyers could be not only end-users, but also other participants in a value chain (e.g. distributors)