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Chapter 2: Analytical Tools and Framework
Group 6:Landon Cotham
Knowl Richardson Amber MorrisKaty Martin
Maddie RamseyDustin Eggleston
Blue Ocean Strategy
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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
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Blue Ocean ◦ Strategy Canvas◦ Four Actions Framework◦ Eliminate-Reduce-Raise-Create Grid◦ Three Characteristics of a Good Strategy
Risk Minimization
Tools For Success
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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
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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
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Wine Industry
GM – auto industry curve is similar to this example
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Price Gas Mileage Technology- OnStar Range of Products- Cars, Trucks, SUVs Ease of Service Reliability of Products
GM’s Principal Factors
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Southwest Airlines
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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
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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
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Eliminate-Reduce-Raise-Create Grid
• The third tool that is key to the creation of blue oceans
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Yellow Tail
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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
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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
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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
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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
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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
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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
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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
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Strategy Canvas Four Actions Framework Eliminate-Reduce-Raise-Create Grid Three Characteristics of a Good Strategy
Summary