Chapter 2: Analytical Tools and Framework Group 6: Landon Cotham Knowl Richardson Amber Morris Katy Martin Maddie Ramsey Dustin Eggleston

 Red Ocean- Five forces of competition analysis and three generic strategies ◦ GM’s Five Forces : ◦ Threat of new entrants- low ◦ Bargaining power of suppliers- very low ◦ Bargaining power of buyer- moderate-high ◦ Threat of substitute products- very few ◦ Intensity of rivalry- very strong

 Blue Ocean ◦ Strategy Canvas ◦ Four Actions Framework ◦ Eliminate-Reduce-Raise-Create Grid ◦ Three Characteristics of a Good Strategy  Risk Minimization

 Two purposes: ◦ Captures current state of play in known marketplace ◦ Shows principal factors important to the industry  Graphic form: ◦ Horizontal axis: range of factors the industry competes on ◦ Vertical axis: offering level that buyers receive across all factors

 Top 8 companies have 75% of market  Other 1600 companies have 25%  Top companies offer high values in each principle factor  Shift strategies from competitors to alternatives, and customers to noncustomers

GM – auto industry curve is similar to this example

 Price  Gas Mileage  Technology- OnStar  Range of Products- Cars, Trucks, SUVs  Ease of Service  Reliability of Products

 Four key questions in order to make a new value curve ◦ Which factors the industry takes for granted should be eliminated? ◦ Which factors should be reduced well below the industry standard? ◦ Which factors should be raised well above the industry standard? ◦ Which factors should be created that the industry never offered?

 The four questions make companies raise/lower values and costs  Yellow Tail became a distinct product of Casella Wines ◦ Served wine enthusiasts and other alcoholic beverage consumers

The third tool that is key to the creation of blue oceans

 The new values offered a product different from the competition.  Their three key qualities: ◦ Focus ◦ Divergence ◦ Good Tagline  Examples: Yellow Tail, Southwest Airlines

 Shown by the points on the value curves  Where the company puts its money  Shows company’s strengths and weaknesses  Yellow Tail does not diffuse its efforts across all key factors of competition

 Values vary from competitors by eliminating, reducing, raising, and creating  Offers a product different from rest of industry targeting more consumers  Southwest pioneered point-to-point travel as opposed to traditional hub-and-spoke systems

 Clear cut- Tells what the company is looking to accomplish in simple language  Compelling- Grabs the attention of the audience and interests them  True- Must be a reasonable statement that can be achieved or people won’t acknowledge it.  Yellow Tail: “A fun and simple wine to be enjoyed every day.”

 Strategy Canvas enables companies to see the future and the present  Companies in Red Ocean- Have similar curves, try to outdo each other yielding no growth ◦ Ex: General Motors

 Overdelivery Without Payback- High values in all sections of core values, overdelivery without payoffs  Internally Driven Company- Think about themselves instead of customer ◦ Ex: Wine companies using confusing language on bottles

 Incoherent Strategy- Company’s values show no purpose, have no vision, random values  Strategic Contradictions- Investing in a core factor without support for it ◦ Ex: Investing in company website without upgrading the site’s speed of operation

 Strategy Canvas  Four Actions Framework  Eliminate-Reduce-Raise-Create Grid  Three Characteristics of a Good Strategy