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Business Strategy and Policy A course within the II level degree in Managerial Economics year II, semester I, 6 credits Lecturer: Dr Alberto Asquer [email protected] Phone: 070 6753399. University of Cagliari, Faculty of Economics, a.a. 2012-13. Lecture 5 Strategic entrepreneurship - PowerPoint PPT Presentation
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University of Cagliari, Faculty of Economics, a.a. 2012-13
Business Strategy and Policy
A course within the II level degree in Managerial Economics
year II, semester I, 6 credits
Lecturer:Dr Alberto [email protected]
Phone: 070 6753399
Business Strategy and Policy
Lecture 5
Strategic entrepreneurship and the Blue Ocean Strategy
Introduction
1. Strategic entrepreneurship
2. Blue Ocean Strategy
3. An example of Blue Ocean Strategy: [yellow tail]
4. The Strategy Canvass and the Four-Actions Framework
5. Other instances of Blue Ocean Strategy
- - - - - - - - - - - - -
6. Summary
1. Strategic entrepreneurship
The process of seeking opportunities and sources of (sustainable) competitive advantage that lead to superior firm performance
Entrepreneurship: the undertaking of innovation in combination with financial and business skills with the aim of accomplishing economic gains
Commonly: the start-up of new business ventures
Sometimes: the undertaking of corporate ventures (e.g., spin-offs)
Strategic entrepreneurship: managing the firm in such a way as to undertake new business ventures that lead to superior performance in the long term
It requires creativity, imagination, and opportunities; dealing with risk; stimulating and supporting innovation; managing change; mastering technology; and (sometimes) designing new business models
1. Strategic entrepreneurship
Firms may undertake offensive strategies, that are explicitly intended to undercut competitors within the same industry and markets
Offensive strategies generally aim to result in higher market share, higher profit margins, and higher growth rate than competitors
They consist of...
Offering comparable products/services at lower price than competitors
Introducing next-generation technology products faster than competitors
Imitating ideas and tactics of competitors
Focusing attacks to the most lucrative segments of competitors and to the weakest competences of competitor
1. Strategic entrepreneurship
In contrast, avoidance strategies relate to steering clear from face-to-face confrontation with competitors (especially, when they are stronger!)
Avoidance strategies entail finding ways to enter the market and gain market share in a way that does not (necessarily) harm competitors, therefore making competitors' retaliation more unlikely to happen
Strategic entrepreneurship may be conceived as a type of avoidance strategy, insofar as it relates to “inventiveness” to define new approaches to the market that do not necessitate direct confrontation with other firms
2. Blue Ocean Strategy
(Kim and Mauborgne, 2005)
2. Blue Ocean Strategy
The Fundamentals of a successful strategy: Value Innovation
Costs
Value
Value innovation
2. Blue Ocean Strategy
Within any given industry, every firm seeks to raise value & cut costs in order to enhance value innovation and outperform the competitors
The effect is more competition, i.e., minor profit margins for everyone
2. Blue Ocean Strategy
Within any given industry, every firm seeks to raise value & cut costs in order to enhance value innovation and outperform the competitors
The effect is more competition, i.e., minor profit margins for everyone
A Red Ocean
2. Blue Ocean Strategy
A successful strategy consists of “pulling ourself out” of the tough competition by venturing into unchartered “water” where no other
competitors are present (yet)
A Blue Ocean
2. Blue Ocean Strategy
A comparison between red and blue oceans:
Red Oceans
Compete in existing markets
Beat the competition
Exploit existing demand
Make the value-cost trade off
Align the firm value chain to the overall strategy (low cost or differentiation or focus)
Blue Oceans
Create uncontested market space
Make the competition irrelevant
Create and capture new demand
Break the value-cost trade off
Align the firm value chain to seeking both differentiation and low cost
3. An example of Blue Ocean Strategy: [yellow tail]
3. An example of Blue Ocean Strategy: [yellow tail]
The setting: the US wine industry, in 2000...
The third largest aggregate consumption of wine worldwide
Highly competitive industry
Large share of California-based producers
Several imported wines from France, Italy, Spain, Chile, Australia and Argentina
Consolidation (8 companies produce more than 75% wine)
Stagnant demand
Battle for shelf space
Rising marketing & advertising costs
3. An example of Blue Ocean Strategy: [yellow tail]
The setting: the US wine industry, in 2000...
The third largest aggregate consumption of wine worldwide
Highly competitive industry
Large share of California-based producers
Several imported wines from France, Italy, Spain, Chile, Australia and Argentina
Consolidation (8 companies produce more than 75% wine)
Stagnant demand
Battle for shelf space
Rising marketing & advertising costs
By and large, not an attractive market
3. An example of Blue Ocean Strategy: [yellow tail]
But...
3. An example of Blue Ocean Strategy: [yellow tail]
But...
2000, Casella Wines introduced [yellow tail] in the US
2001, about 112,000 cases were sold
2002, it became the fastest growing brand in the histories of both the Australian and the US wine industry; it was number one imported wine into the US (more than French and italian wines)
2003, it became number one red wine in 750ml bottle sold in the US (more than the same Californian wines)
2005, about 7,500,000 cases sold
3. An example of Blue Ocean Strategy: [yellow tail]
But...
2000, Casella Wines introduced [yellow tail] in the US
2001, about 112,000 cases were sold
2002, it became the fastest growing brand in the histories of both the Australian and the US wine industry; it was number one imported wine into the US (more than French and italian wines)
2003, it became number one red wine in 750ml bottle sold in the US (more than the same Californian wines)
2005, about 7,500,000 cases sold
How did they do it?
4. The Strategy Canvass and the Four-Actions Framework
Some tools for analysis within the Blue Ocean Strategy:
The Strategy Canvass
The Four-Actions Framework
4. The Strategy Canvass and the Four-Actions Framework
A fresh way to picture the industry structure: the strategy canvas
Dimensionsof competition
Price Technical distinctions
Noticeablemarketing
Aging quality
Vineyardprestige
Wine complexity
Wine range
High
Low
Premium wines
Budget wines
4. The Strategy Canvass and the Four-Actions Framework
A fresh way to design innovative products: the four-actions framework
A new value curve
ReduceWhich factors should be reduced well below the industry's standards?
RaiseWhich factors should be
raised well above the industry's standards?
EliminateWhich of the factors that the
industry takes for granted should be eliminated?
CreateWhich factors should be
created that the industry has never offered?
4. The Strategy Canvass and the Four-Actions Framework
A fresh way to design innovative products: the four actions framework
A new value curve
ReduceWhich factors should be reduced well below the industry's standards?
RaiseWhich factors should be
raised well above the industry's standards?
EliminateWhich of the factors that the
industry takes for granted should be eliminated?
CreateWhich factors should be
created that the industry has never offered?
Complex enological termsRelevance of aging qualityNoticeable marketing
Easy drinkingEase of selectionFun & adventure
Wine complexityWine rangeVineyard prestige
Price (vs. budget wines)Retail store involvement
4. The Strategy Canvass and the Four-Actions Framework
The design of a new product: [yellow tail]
Dimensionsof competition
Price Technical distinctions
Noticeablemarketing
Aging quality
Vineyardprestige
Wine complexity
Wine range
High
Low
Premium wines
Budget wines
Easy drink, ease of selection, fun and adventure
4. The Strategy Canvass and the Four-Actions Framework
(www.yellowtailwine.com)
4. The Strategy Canvass and the Four-Actions Framework
(www.yellowtailwine.com)
4. The Strategy Canvass and the Four-Actions Framework
Some features of the [yellow tail] strategy:
No heavy marketing & advertising investments
No significant resource of distinctive capability
No remarkably different or innovative product (it's a wine!)
While...
Reframing of the wine product experience in consumers' perception
Appeal to non-wine consumers
Positioning [yellow tail] as something “not commensurable” with other wines (is it a wine?)
5. Other instances of Blue Ocean Strategy
Nintendo's Wii (2006) It created a radically different “game concept”' with respect to the traditional (i.e., joystick or gamepad based) videogame consoles
It attracted those who were traditionally “non-gamer”' (e.g., parents) and offered new social venues for entertainment
5. Other instances of Blue Ocean Strategy
Dell's computers (1990s) It created a radically different retail and delivery system (i.e., direct sales at low cost, customisable machines, and about 4 days delivery time) with respect to competitors
It attracted those who had not bought computers before because of ease of access, customisation, and low price
5. Other instances of Blue Ocean Strategy
6. Summary
Main points
Strategic entrepreneurship consists of firms' efforts to undertake new business ventures that lead to superior performance in the long term
Firms may undertake offensive strategies to undercut competitors within the same industry and markets, or avoidance strategies to steer clear of direct confrontation with competitors
Blue Ocean Strategy provides an intellectual and methodological approach to designing strategies intended to guide firms into markets where competition is less intense
Key tools are the Strategy Canvass and the Four-Actions Framework
