Chapter 2: Analytical Tools and Framework

Group 6:Landon Cotham

Knowl Richardson Amber MorrisKaty Martin

Maddie RamseyDustin Eggleston

Blue Ocean Strategy

Red Ocean- Five forces of competition analysis and three generic strategies◦GM’s Five Forces:◦ Threat of new entrants- low◦ Bargaining power of suppliers- very low◦ Bargaining power of buyer- moderate-high◦ Threat of substitute products- very few◦ Intensity of rivalry- very strong

Tools For Success

Blue Ocean ◦ Strategy Canvas◦ Four Actions Framework◦ Eliminate-Reduce-Raise-Create Grid◦ Three Characteristics of a Good Strategy

Risk Minimization

Tools For Success

Two purposes:◦ Captures current state of play in known

marketplace◦ Shows principal factors important to the industry

Graphic form:◦ Horizontal axis: range of factors the industry

competes on◦ Vertical axis: offering level that buyers receive

across all factors

Strategy Canvas for Blue Ocean Strategy

Top 8 companies have 75% of market Other 1600 companies have 25% Top companies offer high values in each

principle factor Shift strategies from competitors to

alternatives, and customers to noncustomers

U.S. Wine Industry

Wine Industry

GM – auto industry curve is similar to this example

Price Gas Mileage Technology- OnStar Range of Products- Cars, Trucks, SUVs Ease of Service Reliability of Products

GM’s Principal Factors

Southwest Airlines

Four key questions in order to make a new value curve◦ Which factors the industry takes for granted

should be eliminated?◦ Which factors should be reduced well below the

industry standard?◦ Which factors should be raised well above the

industry standard?◦ Which factors should be created that the

industry never offered?

Four Actions Framework

The four questions make companies raise/lower values and costs

Yellow Tail became a distinct product of Casella Wines◦ Served wine enthusiasts and other alcoholic

beverage consumers

Effects of Four Actions Framework

Eliminate-Reduce-Raise-Create Grid

• The third tool that is key to the creation of blue oceans

Yellow Tail

The new values offered a product different from the competition.

Their three key qualities: ◦ Focus◦ Divergence◦ Good Tagline

Examples: Yellow Tail, Southwest Airlines

Three Characteristics of a Good Strategy

Shown by the points on the value curves Where the company puts its money Shows company’s strengths and

weaknesses Yellow Tail does not diffuse its efforts across

all key factors of competition

Focus

Values vary from competitors by eliminating, reducing, raising, and creating

Offers a product different from rest of industry targeting more consumers

Southwest pioneered point-to-point travel as opposed to traditional hub-and-spoke systems

Divergence

Clear cut- Tells what the company is looking to accomplish in simple language

Compelling- Grabs the attention of the audience and interests them

True- Must be a reasonable statement that can be achieved or people won’t acknowledge it.

Yellow Tail: “A fun and simple wine to be enjoyed every day.”

Tagline

Strategy Canvas enables companies to see the future and the present

Companies in Red Ocean- Have similar curves, try to outdo each other yielding no growth◦ Ex: General Motors

Value Curve Advantages

Overdelivery Without Payback- High values in all sections of core values, overdelivery without payoffs

Internally Driven Company- Think about themselves instead of customer◦ Ex: Wine companies using confusing language on

bottles

Ineffective Strategies

Incoherent Strategy- Company’s values show no purpose, have no vision, random values

Strategic Contradictions- Investing in a core factor without support for it◦ Ex: Investing in company website without

upgrading the site’s speed of operation

Ineffective Strategies

Strategy Canvas Four Actions Framework Eliminate-Reduce-Raise-Create Grid Three Characteristics of a Good Strategy

Summary