BLUE OCEANS: CHAPTER 2
ANALYTICAL TOOLS AND
FRAMEWORKS
By: Anthony Gauthier, John Bell, Austin Hughes,
Travis Messerschmitt, and Michael Wilson
AN ABSENCE OF ANALYTICS
There are many tools for success in red oceans.
 Effective blue ocean strategy is risk minimization not
risk taking.

AN EXAMPLE
20 billion dollar U.S. wine industry highly
competitive.
 Oversaturation of large competitors.
 Despite large array of choices consumer base
stagnant.
 Prices going down, small competitors cannot
compete.
 Not conventionally attractive…

THE STRATEGY CANVAS
“A diagnostic and an action framework for
building a compelling blue ocean strategy.”
 Seven Principals of U.S. Wine Industry:
 Price per bottle
 Elite packaging
 Above the line marketing
 Aging quality
 Prestige of vineyard
 Complexity of taste
 Diverse range of wines

Value Curve
-Depicts a company’s performance across its
industry’s factors of competition.
The higher the point on the graph, the more the
company invests in that factor of competition.
WHAT KNOWLEDGE CAN YOU GAIN FROM
ANALYZING THE VALUE CURVE?
-Potential to create a blue ocean.
Blue Ocean: Makes competition irrelevant by exposing/creating
new factors of competition
How does a company create a blue ocean?
1. Reorient their strategic focus from benchmarking its
competitors to finding new alternatives
2. Shifting focus from its consumers to its nonconsumers
-Result: Finding better solutions than your rivals to existing
problems in your industry
How to Change Your Industry’s Strategic Logic
The Four Actions Framework- Consists of four questions that help to
challenge an industry’s strategic logic
1. Which of the factors that the industry takes for granted should be eliminated?
Intensive Distribution
2. Which factors should be reduced well below the industry’s standard?
Sports promotions: Air Race World Series, X-Fighters World Tour, Crashed Ice,
Cliff Diving World Series
A factor RedBull has already reduced is the sale of apparel. They do not sell
merchandise, and this makes the consumer market crave RedBull products.
3. Which factors should be raised well above the industry’s standard?
Prestige, exclusivity (merchandise not sold)
4. Which factors should be created that the industry has never offered?
Sell merchandise?
The Four Actions Framework allows a company to make the current rules of their
industry irrelevant
CASELLA WINES – BLUE OCEAN
•
•
•
•
Casella Wines’ strategic profile broke
from the competition and created a blue
ocean.
Did so by creating a social drink of wine
[yellow tail] was accessible to drinkers of
all types (beer, wine, nonwine)
[yellow tail] was able to leapfrog
competitors without significant
marketing investment.
CASELLA WINES
Drinkers of more expensive wines began moving
down to drink more [yellow tail] and drinkers of
less expensive wines began moving up.
 [yellow tail] found a new market for fun and
adventurous wines that hadn’t been tapped in to.

A FUN WIN
Casella Wines created a mass-appealing wine by
softening the taste and sweeting the flavor,
which shortened the aging time required.
 This new wine was approachable like beer and
cocktails.
 Doing this significantly lowered the costs
associated with wineries and the aging process.

[YELLOW TAIL]
[yellow tail] created a simple, attractive label and
packaging that was less intimidating than
traditional wine producers.
 By only offering two wines at the start, [yellow
tail] simplified the selection process.
 Most wines were targeted at upper income
professionals, not the general public.
 [yellow tail] did not try to portray itself as a
traditional winery exclusive to the elite.

ELIMINATE-REDUCE-RAISE-CREATE
ELIMINATE
Which factors that the industry has long
competed on should be eliminated?
 Casella Wines eliminated sophistication and
pretentiousness of wine

REDUCE
Which factors should be reduced well below the
industry’s standards?
 Casella Wines reduced wine complexity and
vineyard prestige/legacy.

RAISE
Which factors should be raised well above the
industry’s standards?
 Casella wines raised price vs. budget wines.

CREATE
Which factors should be created that the industry
has never offered?
 Casella made it easy to drink, fun and
adventurous, comparable to beer and mix drinks.

COMPONENTS OF A GOOD BLUE OCEAN
STRATEGY
1.
2.
3.
Focus
Divergence (from industry)
Compelling Tagline That Speaks to
the Market
FOCUS
Every great strategy has focus.
 Southwest Airlines:

Friendly service
 Speed
 Frequent point to point departures


They also determine what NOT to focus on.
Lounges
 Meals
 Seating Choices

THINK ABOUT IT…
Why would a company
NOT focus on certain
things?
DIVERGENCE
Divergence is how companies with a Blue Ocean
Strategy set themselves apart.
 It shows up in their value curve.
 How to create a blue ocean out of a red ocean value
curve:

Eliminate some areas
 Reduce some areas
 Increase some areas
 Create new areas

…CHANGE THINGS
SWA VALUE CURVE
COMPELLING TAGLINE
“The speed of a plane at the price of a car—whenever you
need it.”
VS.
“Set yourself apart from the middle class passengers as you
get food, normal customer service, lounges, slower speeds,
and higher prices.”

Tag lines must have:


Clear message
Truthful advertisement of offering
COMPONENTS OF A GOOD BLUE OCEAN
STRATEGY
1.
2.
3.
Focus

Focus, or costs will be very high.

Diverge from industry standards, or be
thrown into the Red Ocean of stiff
competition.
Divergence
Compelling Tagline That Speaks to
the Market

If it doesn’t have one of these, it might
not have potential to be great.
SHOULD RED BULL EXPAND INTO A BLUE OCEAN?
Red Bull’s rapid growth and success rely on it’s
marketing strategy more so than it’s unique
product.
 The Soft Drink manufacturing has 135
companies competing with big names such as
Coca Cola and Pepsi co = a red ocean.
 Could Red Bull already be competing in a blue
ocean?
 The jury is still out…

RED BULL VS THE WORLD
Traditional Soft Drink
(Coca Cola or Pepsi)
Typical soft drink
product, firmly
established in the red
ocean.
 Coca Cola brings
people together.
Everyone drinks Coke
and Pepsi.
 Can afford to drive
prices down to
compete.

Red Bull



Energy Drink product,
road less traveled. Only
serious direct competitor
is Monster.
Red Bull is heavily
marketed towards the
young, and sports savvy.
Due to supply chain Red
Bull is already more
expensive than most
cheap brands. But can
afford the premium,
why?
RED BULL’S BLUE OCEAN STRATEGY




Eliminate- Red Bull surrendered its potential broad
appeal on the soft drink market to pursue the niche
field of energy drinks. Rethink the formula.
Reduce- Red Bull reduced the overall approachability
and availability of its product by producing energy
drinks.
Raise- Red Bull raised the price of its product relative
to cheaper soft drinks.
Create- Red Bull created a niche product that targets
consumers outside or already consuming soft drinks
for other reasons. As well as a marketing campaign
that targets these consumers relentlessly.