Blue Ocean Strategy
Chapter 3: Reconstruct Market Boundaries
Team 6
Morgan Boone
Brodie Calley
Carter Hewlett
Austin Hinkle
Nailah Jones
Current Event
 Wall Street Journal – “Colleges Spar Over Nursing”
 Community campuses bid to offer upper-level courses; is
opposed by four-year schools
 If California bill is passed, BSN degrees will become
available through community colleges
 Path 2
 Opens up competition between educational institutions
 Path 4
 Trade up to major college, or trade down to community
college
What companies tend to do
 Define their industry
 Look at the industries through strategic groups and try to
stand out in the ones they play in
 Focus on the same buyer group whether it be purchaser,
user, or influencer.
 Define the scope of the products and services offered
 Accept their industry’s functional or emotional orientation
 Focus on the same point in time in formulating strategy.
 The six assumptions mentioned in the previous slide
are the assumptions that most companies tend to build
their strategies upon
 By sticking to these assumptions, companies are
trapped in competing in red oceans
 When the the enhanced alternatives are applied,
competing in a blue ocean becomes realistic
Overview: 6 Paths Framework
•
6 basic approaches to remaking market boundaries
•
Clear patterns for creating blue oceans
•
Doesn’t require special vision about the future, all
focus on looking at familiar date from a new
perspective
The 6 Paths
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1. Alternative Industries
2. Strategic Groups
3. Buyer Groups
4. Complementary Product and Service Offerings
5. Functional-Emotional Orientation of an Industry
6. Time
Path 1: Look Across Alternative
Industries
 Substitutes
 Product or services with different forms, but the same
functionality
 Alternatives
 Products or services with different functions, but the same
purpose
 NetJets
Strategy Canvas of NetJets
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6
5
4
3
2
1
0
Private Jet
NetJet
Commercial Airline
How this can help Academy
 Rather than focusing on similar products, substitutes,
market to new customers with new products,
alternatives
Path 2: Look Across Strategic
Groups Within Industries
 Strategic Groups
 “A group of companies within an industry that pursue a similar
strategy”
 Strategic groups can usually be ranked based on two
dimensions:
 1. Price
 2. Performance
 Each jump in dimension tends to include a corresponding
jump
 i.e. as price increases, performance should increase as well
 Companies try to compete within their strategic groups
 Mercedes doesn’t focus on competing with Ford, but
they do focus on outcompeting Jaguar
 Companies can create a Blue Ocean by understanding
why consumers “trade up” or “trade down”
 Lexus offered the quality of a high-end Mercedes, but
at the price of a lower-end Lincoln
Curves
 Curves began franchising in 1995.
 They based their strategy on why Women trade up to a
health club, or trade down to a home workout tape.
 By cutting out all of the extras, they created an
affordable fitness club that was just a fast as a home
workout.
Path 3: Look Across the Chain of
Buyers
 In most industries, competitors can agree on a common
definition of who the target buyer is for that industry
 In reality, there is a series of “buyers” who are directly or
indirectly involved in the buying decision
 Three groups are involved in the buying process
 Purchasers
 Users
 Influencers
 The “purchasers” of the product, who pay for it, may differ
from the products actual “users”. There can also be
important “influencers” of the product as well
 Individual companies in an industry often target
different segments of customers, but they typically end
up targeting a single buyer group
 Challenging an industry’s conventional approach to
targeting customers can lead to the discovery or
creation of a Blue Ocean
 By looking across buyer groups, companies can gain new
insights about how to re-evaluate their strategies to target
previously overlooked sets of buyers
 Example
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Insulin Pens
Typically directly sold and marketed to Doctors
Started marketing towards the end consumer
Created a new product/business (NovoPen)
 By questioning conventional definitions of who can and
should be the target buyer, companies can often see
new and vastly different ways to create or unlock value
Path 4: Look Across Complementary
Product and Service Offerings
 Untapped value is often hidden in complementary
products and services
 Think about what happens before, after, and during the
product/service being used
 Expedia allows you to book your airline ticket, hotel,
and rental car at the same time
 The majority of travelers need these accommodations
when they travel
Admit Two?
 If you and your significant other wanted to see a movie,
what services might make this easier?
 Although childcare is not included in the price of a
movie ticket, nor is it part of the theatre experience, the
ease of finding a babysitter affects the perceived value
of going to the movies
Pain Points
 Identify potential “pain points” your customer may
experience, and try to alleviate them prior
 Obtaining a hunting license can be done at Academy
 This alleviates the pain point of the customer having to
buy their hunting gear at Academy and then having to go
somewhere else to get the approved license
 Eliminates extra steps in the purchasing process
NABI
 A Hungarian bus company
 Realized that the key expenses in public transportation
(busses) was not in the initial purchase, but in the
repairs
 When busses were well repaired, they also ran on time
and customers were happier with the experience
• Fiberglass
• Lower powered engines
• More Space inside of bus
• Steel
• Hard to repair
• Less Spacious
Path 5: Look Across Functional or
Emotional Appeal to Buyers
 Companies in similar industries tend to compete based
on one of two appeals
 1.Some industries compete principally on price and
function, largely on calculations of utility
 Their appeal is considered to be rational
 2. Others choose to compete largely on feelings
associated with their product/service
 Their appeal is emotional
 The appeal of most products or services is rarely
intrinsically one or the other
 Over time, functionally oriented industries tend to
become more functionally oriented and emotionally
oriented industries become more emotionally oriented
 When companies are willing to challenge the
functional-emotional orientation of their industry, they
often find new market space
 Emotionally Oriented Industries
 Offer many extras that add price without enhancing
functionality
 By removing those extras, there is the possibility to create
fundamentally simpler, lower-priced, lower-cost business
models that customers would welcome
 Functionally Oriented Industries
 Can often give their products new life by incorporating
elements of emotion
 In doing so, they can stimulate new demand
 A burst of Blue Ocean creation is becoming prominent
in a number of service industries, but in the opposite
direction
 Many of them are moving from an emotional orientation to
a functional orientation
 Application to Academy Sports and Outdoors
 Academy competes on functionality
 Offers a wide range of products at affordable prices
 By adding in emotional appeals, such as family
bonding while using their sports and outdoors products,
or building comradery within a team, the brand would
be associated with more than just tangible products
Path 6: Look Across Time
 All industries are subject to external trends
 Insights come from how the trend will change value to
customers
 This approach is more difficult than the previously
discussed approaches
Apple and iTunes
 An example of this is Apple launching iTunes in 2003
 1990’s the market was flooded with illegal music file
sharing
 Allowed customers to buy individual song
 iTunes was a huge success
 Average 2.5 million downloads per week
 Apple’s iTunes unlocked a blue ocean in digital music
Summary: Conceiving New Market
Space
 By thinking across conventional boundaries of
competition, you can see how to make conventionaltering, strategic moves that reconstruct established
market boundaries and create Blue Oceans
 By considering the restructure of existing market
elements across industry and market boundaries, firms
will be able to free themselves from the head-to-head
competition in red oceans