Blue Ocean Strategy Analytical Tools and Frameworks Jessica Sorey, Vincent Conder, Miguel Valencia, Kylar Ferguson

Overview US Wine Industry The Strategy Canvas Four Action Framework Eliminate-Reduce-Raise-Create Grid Three Characteristics of Good Strategy Reading the Value Curves Types of Tools and Frameworks

US Wine Industry US has third largest consumption of wine before 2000 US was ranked 31st in per capita consumption worldwide Estimated $20 billion in sales California wines were ⅔ of all US wine sales US wines were competing with other countries and domestics Eight companies produced 75 percent of US wine In 2000 the US wine industry faced Mounting price pressure Increasing bargaining power on the part of retail and distribution channels Flat demand despite overwhelming choices

The Strategy Canvas Horizontal Axis: Captures the current state of play in the known market space Understand where the current competition is investing Factors the industry currently competes on in products, services, and delivery The consumer benefits of the existing competitive offerings Vertical Axis: Captures the offering level that buyers receive across key competing factors

The Strategic Canvas The Value Curve A graphic description of a company’s relative performance across its industry’s factors of competition To shift the strategy canvas a company must turn focus from customers to non customers and from competitors to alternatives

The Four Action Frameworks To create a new value curve companies have four key questions:

The Eliminate-Reduce-Raise-Create Grid [yellow tail] Enological terminology and distinctions Aging qualities Above-the-line marketing Reduce Wine complexity Wine range Vineyard prestige Raise Price versus budget wines Retail store involvement Create Easy drinking Ease of selection Fun adventure

The Eliminate-Reduce-Raise-Create Grid [Cirque du Soleil] Star performers Animal shows Aisle concession sales Multiple show arenas Reduce Fun and humor Thrill and danger Raise Unique venue Create Theme Refined environment Multiple productions Artistic music and dance

Three Characteristics of a Good Strategy Focus- commitment to a uniformed organization-wide strategy Divergence- a particular thing(s) sets your company apart from your competitors Compelling tagline- something that attracts customers because it pops “The speed of a plane at the cost of a car whenever you need it”

Examples of Good Strategy Yellowtail Wine They were focused organization-wide Their value curve diverged away from competitors which ultimately created a blue ocean Their tagline was clear, “a fun and simple wine to be enjoyed everyday” Southwest Airlines Frequent and flexible departures mixed with attractive prices allowed Southwest to create their own blue ocean They diverged from the industry by offering flights to mid-sized cities

Reading the Value Curves When a company meets the 3 characteristics they are on the right track. Does a business deserve to be a winner? Lacks Focus- Cost structures will be high & their business model will be complex in implementation and execution. Lacks Divergence- Companies business strategy is not different from their competitors. Lacks Compelling tagline- no natural takeoff capability.

Types of Tools and Frameworks Companies Caught in the Red Ocean Overdelivery without Payback Companies that are oversupplying customers, can lead to low market share and profitability An Incoherent Strategy Strategic Contradictions A factor competes at a high level but its supporting factors are lacking An Internally Driven Company Are the company’s factors presented in a way that customers can understand? (Jargon)