11 a.m., Team 2 - Dylan, Bruno, Nital, Christopher Renew Blue Oceans 11 a.m., Team 2 - Dylan, Bruno, Nital, Christopher

Blue Ocean Strategies are Dynamic To employ a long-term blue ocean strategy, a company should first consider how difficult it will be for imitators to copy their success. Imitators turn a blue ocean into a red ocean, and limiting their capabilities is key. Companies must be prepared to value innovate repeatedly. A value curve can be used to evaluate how close a market is to being a red ocean.

Example: Craft Beer A-B InBev has greatly expanded its craft beer offerings in terms of brands as well as availability. In 2018, they created a standalone division, which includes over a dozen brands, to oversee their craft brand portfolio.

Example: Global Strategy A-B InBev uses its extreme size as a competitive advantage. Imitators cannot easily copy Anheuser’s market share and resources. For instance, A-B InBev acquired SABMiller for $107 billion to establish a foothold in Africa and further expand their market share across the African continent.

Imitation Barriers to Blue Ocean Strategy Alignment Barrier Alignment of the value, profit, and people propositions around both differentiation and low cost builds sustainability and hence a formidable barrier to imitation. Cognitive and organizational barrier Value innovation does not make sense to a company’s conventional logic. Imitation often requires significant organizational changes. Brand barrier Blue ocean strategy may conflict with other companies’ brand image. Companies that value-innovate earn brand buzz and a loyal customer following that tends to shun imitators.

Imitation Barriers continued... Economic and legal barriers Natural monopoly: the market often cannot support a second player. High volume leads to rapid cost advantage for the value innovator, discouraging followers from entering the market. Network externalities discourage imitation. Patents or legal permits limitation.

When to Value-Innovative Again •Eventually, almost every blue ocean strategy will be imitated ▫Result: you may fall into the trap of competition •Overtime, you may focus on the competition and not the buyer ▫If you stay on this course, the basic shape of your value curve will begin to converge with those of the competition •To avoid the trap of competing you need to monitor value curves on the strategy canvas ▫Monitoring value curves signals when and when not to value innovate ▫Also, it keeps you from pursuing another blue ocean when there is still a profit stream to be collected from your current offering •When the company’s value curve still has focus you should resist the temptation to value innovate again ▫However, you should focus on operational improvements and geographical expansion to achieve the maximum economies of scale and market coverage

When to value innovative continued •As rivalry intensifies and total supply exceeds demand, bloody competition commences and the ocean will turn red • It becomes vital that you plot your own and your competitors’ value curves on a strategy canvas to determine when you should create a new blue ocean ▫This allows you to see the extent to which your blue ocean is turning red

Examples In 2017, Ab-Inbev planned on opening up breweries in China to drive more growth Growth in China, the US, and Mexico caused sales revenue to increase by 3.6 percent by the end of the 3rd quarter in 2017 Ab-Inbev 5 point plan to get its brand back on top Create your own quasi-craft brands Buy craft brands that will sell out Defend macro brews while undermining craft breweries Control distribution Merge and overwhelm the marketplace

Examples Cont. Ab-Inbev planned to reorganize starting January 2019 Cutting geographic zones and speeding up decision making The idea is to organize the company for growth and to simplify it to and make it easier to adapt to market changes

Questions?