University of Cagliari, Faculty of Economics, 2011-12
Business Strategy and Policy
A course within the II level degree in
Managerial Economics
year II, semester I, 9 credits
Lecturer:
Dr Alberto Asquer
aasquer@unica.it
Phone: 070 6753399
Introduction
0. Strategic entrepreneurship
1. Offensive strategies
2. Blue Ocean Strategy
3. An example of Blue Ocean Strategy: [yellow tail]
4. Other instances of Blue Ocean Strategy
------------5. Summary
0. Strategic entrepreneurship
The process of seeking opportunities and sources of (sustainable)
competitive advantage that lead to superior firm performance
Entrepreneurship: the undertaking of innovation in combination with
financial and business skills with the aim of accomplishing economic
gains
Commonly: the start-up of new business ventures
Sometimes: the undertaking of corporate ventures (e.g., spin-offs)
Strategic entrepreneurship: managing the firm in such a way as to
undertake new business ventures that lead to superior performance
in the long term
It requires creativity, imagination, and opportunities; dealing with risk;
stimulating and supporting innovation; managing change; mastering
technology; and (sometimes) designing new business models
1. Offensive strategies
Firms may undertake offensive strategies, that are explicitly intended
to undercut competitors within the same industry and markets
Offensive strategies generally aim to result in higher market share,
higher profit margins, and higher growth rate than competitors
They consist of
Focusing efforts to create and sustain (renew) competitive
advantages
Surprising the competitors through unexpected and smart moves
Investing in those areas where competitors are most vulnerable
Being dissatisfied with the status quo and seeking rapid actions to
gain advantages
1. Offensive strategies
Examples of offensive strategies:
Offering comparable products/services at lower price than
competitors
Introducing next-generation technology products faster than
competitors
Sustaining continuous product innovation
Imitating ideas and tactics of competitors
Focused attacks to the most lucrative segments of competitors
Focused attacks to the weakest competences of competitors
Moving (first) to unexplored business areas
2. Blue Ocean Strategy
Fundamentals of a successful strategy (Kim and Mauborgne, 2005):
Costs
Value innovation
Value
2. Blue Ocean Strategy
Fundamentals of a successful strategy:
Within any given industry, every firm seeks to raise value & cut costs
in order to enhance value innovation and outperform the competitors
The effect is more competition, i.e., minor profit margins for everyone
2. Blue Ocean Strategy
Fundamentals of a successful strategy:
Within any given industry, every firm seeks to raise value & cut costs
in order to enhance value innovation and outperform the competitors
The effect is more competition, i.e., minor profit margins for everyone
Red Ocean
2. Blue Ocean Strategy
Fundamentals of a successful strategy:
A successful strategy for a firm consists of 'pulling itself out' of the
competition by venturing into unchartered 'water' where no other
competitors are present (yet)
Blue Ocean
2. Blue Ocean Strategy
A comparison between red and blue oceans:
Red Oceans
Blue Oceans
Compete in existing markets
Create uncontested market space
Beat the competition
Make the competition irrelevant
Exploit existing demand
Create and capture new demand
Make the value-cost trade off
Break the value-cost trade off
Align the firm value chain to
the overall strategy (low cost
or differentiation or focus)
Align the firm value chain to
seeking both differentiation and
low cost
3. An example of Blue Ocean Strategy: [yellow tail]
3. An example of Blue Ocean Strategy: [yellow tail]
Setting: the US wine industry, in 2000
The third largest aggregate consumption of wine worldwide
Highly competitive industry
Large share of California-based producers
Several imported wines from France, Italy, Spain, Chile, Australia
and Argentina
Consolidation (8 companies produce more than 75% wine)
Stagnant demand
Battle for shelf space
Rising marketing & advertising costs
3. An example of Blue Ocean Strategy: [yellow tail]
A fresh way to picture the industry structure: the strategy canvas
High
Premium wines
Budget wines
Low
Price
Technical
distinctions
Noticeable
marketing
Aging
quality
Vineyard
prestige
Dimensions
of competition
Wine
complexity
Wine
range
3. An example of Blue Ocean Strategy: [yellow tail]
A fresh way to design innovative products: the four actions framework
Reduce
Which factors should be
reduced well below the
industry's standards?
Eliminate
Which of the factors that the
industry takes for granted
should be eliminated?
A new
value curve
Raise
Which factors should be
raised well above the
industry's standards?
Create
Which factors should be
created that the industry has
never offered?
3. An example of Blue Ocean Strategy: [yellow tail]
A fresh way to design innovative products: the four actions framework
Reduce
Which factors should be
reduced well below the
industry's standards?
Eliminate
Which of the factors that the
industry takes for granted
should be eliminated?
Complex enological terms
Relevance of aging quality
Noticeable marketing
A new
value curve
Raise
Which factors should be
raised well above the
industry's standards?
Wine complexity
Wine range
Vineyard prestige
Create
Which factors should be
created that the industry has
never offered?
Easy drinking
Ease of selection
Fun & adventure
Price (vs. budget wines)
Retail store involvement
3. An example of Blue Ocean Strategy: [yellow tail]
The design of a new product: [yellow tail]
High
Premium wines
Budget wines
Low
Price
Technical
distinctions
Noticeable
marketing
Aging
quality
Vineyard
prestige
Dimensions
of competition
Wine
complexity
Wine
range
Easy drink, ease of selection,
fun and adventure
3. An example of Blue Ocean Strategy: [yellow tail]
The results
2000, introduction of [yellow tail] in the US
2001, about 112,000 cases sold
2002, the fastest growing brand in the histories of both the Australian
and the US wine industry; number one imported wine into the US
(more than French and italian wines)
2003, number one red wine in 750ml bottle sold in the US (more
than Californian wines)
2005, about 7,500,000 cases sold
3. An example of Blue Ocean Strategy: [yellow tail]
Some features of the [yellow tail] strategy:
No heavy marketing & advertising investments
No significant resource of distinctive capability
No remarkably different or innovative product (it's a wine!)
While...
Reframing of the wine product experience in consumers' perception
Appeal to non-wine consumers
Positioning [yellow tail] as something 'not commensurable' with other
wines (is it a wine?)
4. Other instances of blue ocean strategy
Nintendo's Wii (2006)
It created a radically different
'game concept' with respect to
the traditional (i.e., joystick or
gamepad based) videogame
consoles
It attracted those who were
traditionally 'non-gamers' (e.g.,
parents) and offered new
social venues for
entertainment
4. Other instances of blue ocean strategy
Dell's computers (1990s)
It created a radically different
retail and delivery system (i.e.,
direct sales at low cost,
customisable machines, and
about 4 days delivery time)
with respect to competitors
It attracted those who had not
bought computers before
because of ease of access,
customisation, and low price
4. Other instances of blue ocean strategy
A questionable example? Geox (1990s)
It created a different product
line based on special product
features ('breathing shoes'),
wide product range, and
affordable prices with respect
to competitors
Did it really attract 'noncustomers' of the shoe
market?
5. Summary
Main points
Strategic entrepreneurship consists of firms' efforts to undertake new
business ventures that lead to superior performance in the long term
Any firm may undertake offensive strategies to undercut competitors
within the same industry and markets
Alternatively, a firm may venture into 'unchartered waters' and pull itself
out of competition (for some time, at least)
Blue Ocean Strategy provides an intellectual and methodological
approach to searching and designing strategies intended to guide firms
into markets where competition is less intense