Blue Ocean StrategyChapter 2:

Analytical Tools and Frameworks

Group 6:Wayni Hebert,Sterling Rose,Justin Simpson,Gwen Singleton,Krista Wells

The Strategy CanvasDiagnostic and Action Framework for building a compelling blue ocean strategy.

It compares core competencies for competition and

their level of importance for

each player in the market.

How to use it in BOS?

Don’t: Offer a little more for a little less

Do: Reorient strategic focus from competitors to alternatives and from customers to noncustomers of the industry.

The Four Actions FrameworkTo create a new value curve

To break the trade-off between differentiation and low cost

The Four Actions Framework

A New Value Curve

1. EliminateWhich factors that the

industry takes for granted should be

eliminated?

4. CreateWhich factors should

be created that the industry has not

seen before?

3. RaiseWhich factors should

be raised well above the industry

standard?

2. ReduceWhich factors should

be reduced well below the industry

standard?

Figure 2-2

The Four Actions Framework1. Eliminate (competition)

Factors your industry competes on

Change in what buyers value

2. Reduce (competition)

Overdesigned products Over served customers

3. Raise (customers)

Eliminate compromises

4. Create (customers)

New sources of value New demand

McDonald’s FrameworkCreate New Sources of Value:

Brandcustomer carecost structure its patenttarget audience

Sustainable – the key test of a core competency measures the ability of a firm to continually increase the advantage of the competency over many years.

“The world has changed. Our customers have changed. We have to change too."

- James R. Cantaloupe, Chairman and CEO, McDonald's, 2003

*http://ezinearticles.com/?McDonalds-Business-Analysis&id=687438

Eliminate-Reduce-Raise-Create GridFigure 2-5: The Case of McDonald’s

Eliminate

Super Size Option

Raise

•Health Standards

Reduce

•Calories in burgers

Create

Salad Menu

Characteristics of a Good Strategy

FocusDivergenceCompelling Tagline

FOCUSIdentify key factors of competition

EX. Quality, speed, price, inovation…..

Choose one factor

Focus on that one factor

Divergence• Break out of the common competing

TechniquesEx. Price war,

• Revolutionize the industry Ex. McDonalds and Starbucks used brand

divergence

• Make changes to the way things done in the industry.Ex. Southwest Airline

Compelling Tagline“The speed of a plane at the price of a car–

whenever you need it.”• What is a tagline?

A short descriptive phrase • Tagline should be

Short and ClearTruthfulUpdated

Ex. “I'm lovin' it” replacing "We love to see you smile."

Reading the Value CurvesA Blue Ocean StrategyA Company Caught in the Red OceanOver delivery Without PaybackAn Incoherent StrategyStrategic ContradictionsAn Internally Driven Company

The Strategy Canvas

Key Points1. Diagnostic and Action Framework for building a

compelling blue ocean strategy.2. Create your own identity and value.3. Act on the Four Actions Framework to create a

new value curve.4. Focus on one key competitive factor and use

divergence to differentiate yourself from the industry.

5. Understanding the value curve can reveal strategic information that can help a company gain market share and become a winner in their industry.