1. Chapter 2: Analytical Tools and Framework
By: Aguinaldo Sebastiao, Carlos Becerra, Ryan Gaddy, Paulo Santos

2. Blue Ocean Strategy A set of analytical tools and frameworks
Fill a central void in the field of strategy
Illustrated by the USA wine industry

3. The USA wine industry was intensely competitive in the late 1990s:
Large number of national producers
Foreign producers entering the market
The demand remained stagnated
How to breakout of this red ocean of bloody competition to make the competition irrelevant?
How to open up and capture a blue ocean of uncontested market space?
Solution: The Strategy Canvas

4. Strategy Canvas elements:
A diagnostic tool
An action framework for building a compelling blue ocean strategy.
Strategy Canvas application to the USA wine industry
Diagnostic: companies were competing on price, aging quality, vineyard prestige and legacy, wine complexity.
Based on this scenario firms have to:
Shift from focusing on competition to alternatives
Shift from focusing on customers to noncustomers

5. Based on these principles Casella Wines:
Focused on non customers and found out that complexite of the flavor was a challenge for average consumers.
With this insight Casella was able to create a blue ocean strategy for the USA wine market.

6. The Four Actions Framework

7. Application to a Real-world Example: Apple
Which factors that the industry takes for granted should be eliminated?
Keyboard
Which factors should be reduced well below the industry standard?
Number of physical buttons.
Which factors should be raised well above the industry standard?
User interface
Ease of use & Simplicity
Which factor should be created that the industry has never offered?
Wireless charger
Apple pay

8. The Eliminate-Reduce-Raise-Create Grid

9. Example: Yellow Tail Eliminate Raise Reduce Create
Enological terminology and distinctions
Above-the-line marketing
Aging qualities
Price versus budget wines
Reduce
Create
Vineyard prestige and legacy
Wine complexity
Wine range
Easy drinking
Ease of selection including retail store support
Fun and adventure

10. Benefits of “The Grid” Must pursue differentiation and low costs
Stops over-engineering
Easily understood
Forces company to robustly scrutinize their business-model

11. Example: Cirque du Soleil
Eliminate
Raise
Price
Unique venue
Star performers
Animal shows
Aisle concession sales
Multiple show arenas
Reduce
Create
Fun and humor
Thrill and danger
Theme
Refined environment
Multiple productions
Artistic music and dance

12. Three Characteristics of a Good Strategy
Focus
Setting your own agenda, don’t let the competition set the agenda
Divergence
Act don’t react; Stand Apart
Compelling Tagline
Honesty and clear-cut

13. Focus - Apple Set your own agenda Apple is customer oriented
Determined in producing high quality products
Apple designs Macs, the best personal computers in the world, along with OS X, iLife,iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

14. Divergence - Apple
When a company’s strategy is formed reactively, it loses its uniqueness.
Reactive Strategies tend to share the same strategic profiles.
What makes Apple stand apart from its competitors?
Closed Systems

15. Compelling Tagline - Apple
Honest and clear-cut tagline
A good tagline must not only deliver a clear message but also advertise an offering truthfully, or else customers will lose trust and interest.
“Think Different”
Apple Music, Apple Pay, Apple TV and Apple Watch

16. Reading the Value Curves
If the company meets the three criterias of Focus, Divergence, and a Compelling Tagline, then the company is on the right track.
If the company lacks any of these qualities it will never reach full potential for growth.

17. A Company Caught in the Red Sea
Overdelivery without Payback
Oversupplying its customers
Needs to cut back productions
Strategic Contradictions
Heavily Investing
Internally Driven Company
Driven by Demand vs. Operationally Driven