Business strategy-It is the root of any business. It’ll give you a clear path for your organization to follow & achieve your dream production/sales/profit. But there are so many companies (among them few are the most successful ones) out there in your industry. How can you achieve rapid growth, making your organization the best among them (or at least better than today)?
We’ll discuss with you a clear strategy line of the mindset that your should’ve in your mind in order to create an attractive marketplace for your products. These are the techniques of not beating your competition rather how to create a new market. We are not talking about creating a new product, we’re talking about selling the same product to the new customer and as well as the old customer in a new way.
Below are the technique and strategies are from the book “Blue Ocean Strategy” written by W. Chan Kim & Renée Mauborgne. This book was first published in 2004. Even we’ll try to discuss a few case studies so that you will have a better understanding of how to implement it practically.
Mainly, there are two oceans “RED & BLUE“. In Red oceans, companies are trying to beat each other (who can capture the maximum number of shares from the existing customer). And then, Blue oceans where companies start to think differently, they make the completion irrelevant, bring the new demand and opportunity for highly profitable growth.
Creating the new Business Strategy:-
If you already running a business, then you need to focus on how can you provide more to your customer with the same investment.
Let us explain,
[Eliminating – Reducing – Raising — Creating]
- Which of the factors that the industry takes for granted should be eliminated?
- What are the factors that should be reduced well below the industry’s standard?
- Which factors should be raised well above the industry’s standard?
- What are the factors that should be created that the industry has never offered?
This is known as the four actions framework that you need to discuss right now with your team about your organization. You’ll understand it better with a case study.
U.S. wine industry
Casella Wines created [yellow tail] a blue ocean. Their strategy broke the competition. Rather than offering wine as wine, Casella made a social drink accessible to everyone: whether it is for beer drinkers, cocktail drinkers, and other drinkers of non-wine beverages.
Where the other enormous wine organizations created solid brands over many years of promoting venture, Casella wines beat the rivalries without much investment in advertising.
How did Casella Wines do that?
Casella Wines realized that the maximum people rejected wine because its complicated taste was difficult to appreciate. They found it as an opportunity to grow. Casella wine has created a soft taste and approachable wine like ready-to-drink cocktails and beer, and had up-front, primary flavors and pronounced fruit flavors. They have created ease of selection in their offering. Casella wines reduced the range of wines offered and maintained only two. The most popular white and Red, Shiraz. In this way, customers didn’t have the complexity to choose.
Casella eliminated all specialized language from the containers and made rather a striking, basic, and nontraditional name including a kangaroo in bright, energetic shades of orange and yellow on a dark foundation.
They did a masterstroke in the simplicity of determination when it made retail shop representatives the ambassadors of those wines by giving them Australian outback dress, including bushman’s caps and oilskin coats to wear at work. The retail workers were propelled by the marked attire and having a wine they, at the end of the day, didn’t feel threatened by, and suggestions to purchase their wines flew out of their mouths. To put it plainly, it was amusing to suggest Casella Wines.
Let’s talk about the framework you should have in your mind while creating the business strategy-
The six path framework–
1. You need to look across the other industries.
What are the elective ventures or alternative industries to your industry? For what reason do clients or customers exchange across them? By giving attention to the key factors that lead purchasers to exchange across elective enterprises and dispensing with or decreasing all the other things, you can make another business procedure of new market space.
Case study of NetJets-The blue ocean of fractional jet ownership. In under 20 years, NetJets has become bigger than numerous other airlines, with in excess of 500 airplanes, working multiple hundred 50,000 trips to more than 140 nations.
Let’s perceive how could they do that?
The most worthwhile mass of clients in the aviation industry is corporate explorers. NetJets took a gander at the current other options also, found that when business voyagers need to fly, they have two options. From one viewpoint, an organization’s executives can fly business class or top-notch on a business carrier. Then again, an organization can buy its own airplane to serve its corporate travel needs. The essential inquiry is, why might one pick one elective industry over another? By focusing on the key factors that lead partnerships to exchange across choices and taking out or diminishing all the other things, NetJets made its blue ocean technique.
Think about this, why do companies decide to utilize business carriers for their corporate travel? Unquestionably it’s not a result of the long registration and security lines, feverish flight moves, short-term stays, or blocked air terminals. Maybe, they pick business carriers for just one explanation: costs. From one perspective, business travel maintains a strategic distance from the high straightforward, fixed-cost venture of a multimillion-dollar fly airplane. Then again, an organization buys just the quantity of corporate aircraft tickets required each year, bringing down factor expenses and decreasing the chance of unused flight travel time that frequently goes with the responsibility for jets. So NetJets offers its clients one-sixteenth ownership for airplanes to be imparted to fifteen different clients, every one qualified for fifty hours of flight time each year. Beginning at $375,000; proprietors can buy an offer in a $6 million airplane. Thusly, the clients get the accommodation of a personal luxury plane at the cost of a business carrier ticket.
Not just that, if you think why do people pick corporate planes over business travel? It requires some investment and during that stay clients needed to pay for lounge or lodgings and so on By offering the best of business travel and personal luxury planes and wiping out and lessening all the other things, NetJets opened up a multibillion-dollar blue ocean wherein clients get the comfort and speed of a personal luxury plane with a low fixed expense and the low factor cost of business aircraft travel. What’s more, the rivalry? As per NetJets, at a particular time 57 organizations have set up partial fly activities; of those, 57 have left the business.
Clients had the option to save a lot of time in light of NetJets. For instance, while a flight from Washington to Sacramento, would require nearly 10.5 hours on a business carrier. But it is just 5.2 hours on a NetJets airplane.
2. You need to look Across the Strategic Groups Within your Industries–
What are the essential gatherings in your industry? For what reason do clients exchange up for the higher GROUPS, and for what reason do they exchange down for the lower one? How one company is offering the same product as yours and gaining more customers? Why other companies are failing to do that? Is it just selling, or the way it is selling?
First, you need to look for the two things, a)Price & b)Performance. You might hear that you can’t offer both like to lower your product price and then increase its performance. The performance that no one can offer in your industry, it’s not possible, right? Then every company would think of a simple strategy like offer more at less cost. And even if you did that you can’t continue it for a longer period due to some factors like Investors. Investors will feel that in terms of profit you or your business aren’t reaching its highest potential of where it can be.
Now, forget all this. What if I say it is possible to reduce the price and increase the performance? Let me explain, by reducing the price I am not saying in the prospect of what customer is paying, (of course that can be reduced, I will come into that in a bit) what I am suggesting is that COST CUTTING. You need to analyze your business. Where your company is investing more for less result. As I mentioned before ‘ Eliminating-Reducing-Raising-Introducing’. You need to eliminate and reduce the factors which are not providing value to you. For example, think you are a headphone manufacturer. Now as a beginner instead of investing in marketing, you can invest that amount to increase the quality of your products. Now in the same price, that customer was paying before, now they can get more values at the same cost.
Case Study of Michigan-based Champion Enterprise– They have identified a blue ocean business strategy by looking at 2 sectors in their Industry. Prefabricated housing and Onsite developers. They realized the existing issues of these sectors. Pre-assembled or Prefabricated houses are easy and quick to construct, however, they are likewise grimly normalized and have low-quality images. Then again, Houses that are worked by designers on location offer assortment and a picture of superior grade, however, are significantly more costly and take more time to fabricate.
Champion made a blue ocean business strategy. Its pre-assembled houses rush to fabricate and profit with gigantic economies of scale and lower costs, yet Champion additionally permits purchasers to pick such top-of-the-line last little details as chimneys, look-out windows, and surprisingly vaulted roofs to give the homes an individual vibe. Basically, Champion has changed the meaning of pre-assembled lodging. That made their houses more attractive in less price in comparison to houses built by on-site developers.
3. You need to look Across the Chain of Buyers.
There is a chain of purchasers who are straightforwardly or in a roundabout way associated with the purchasing choice. The buyers who pay for the item or administration might contrast from the genuine clients, and at times, there are significant influencers as well. What is the customer segment that you are targeting? If you are opening a restaurant then most probably you are targeting those local consumers. If you are a gaming headphone seller you need to target the young generation more.
Although you need to look beyond your customers, those who are not buying your products. Why they aren’t choosing your services. I will talk about it later in this article.
4. Why we often miss the Complementary Product and Service Offerings.
We all know the value of it as customers, but when it comes to our own business we don’t give that priority to it. Imagine there are two book stores in your location. Both do have a good collection of books. Now one book store has a few tables and chairs to read if you like. You can read a few pages and then if you like it you can buy that book. Now more likely you will end up in this store. The other book store failed to understand these little services that can give good returns.
Another example, suppose you are opening a movie theatre and you noticed there is 30 to 40 percent customer as married couple with kids. They fail to enjoy the show, as they need to handle their kids. Now, you took it as an opportunity you opened a caretaker center for the kids whose parents will come to enjoy the shows. These steps are more likely to bring new customers as well when they will hear you have these benefits in your theatre.
And sometimes you need to add some complementary to give an emotional value to your product. And that leads me to the 5th path
5. Look Across Functional or Emotional Appeal to Buyers.
Does your industry contend with functionality or enthusiastic allure? If your company is competing with emotional elements, you need to think can be transferred from emotional to functional? What will be the impact? And the main question is how to do that?
At the point when organizations will challenge the functional emotional direction of their industry, they often discover new market space. Let’s look at one example-
Case Study of QB (Quick Beauty) House Barbershop. QB house created a blue ocean business strategy from shifting their elements of emotional to functionality. It started in 1996 in Tokyo. QB House has grown from 1 shop in 1996 to over 200 outlets in 2003. How did they do that?
In Japan, the time it takes to get a man’s hairstyle drifts is around 60 minutes. Why? A long interaction of exercises is embraced to make the haircutting experience a custom. Various hot towels are applied, shoulders are scoured and rubbed, clients are served tea and espresso, and the hairdresser follows a custom in trimming hair, including uncommon hair and skin medicines, for example, blow-drying and shaving. Due to that, the genuine time spent trimming hair is a negligible portion of the complete time. Besides, these activities make a long line for other expected clients. The cost of this haircutting is $27 to $45.
QB House changed all that. It is perceived that many individuals, particularly those working professionals don’t wish to squander an hour on a hairstyle. So QB House stripped away the emotional elements of hot towels, shoulder rubs, and tea and espresso. Then they decreased special treatments. Their main focus became only hair cutting. It did save a lot of time for the customers. And cost as well, where they had to pay $27-$45 to other barbershops now in QB they are paying around $9.
This is how QB house made the completion in the red ocean irrelevant and created a new blue ocean business strategy.
6. Start looking across the time.
One of the main skills one entrepreneur or his/her team should have is to analyze the trend or to look across the time. Most organizations adjust gradually as circumstances changes. Regardless of whether it’s the rise of new technology or major administrative changes, supervisors will in general focus on projecting the actual pattern. That is, they ask in which course innovation will advance, how it will be taken on, regardless of whether it will become adaptable. Think about the quick rise of the Internet or the worldwide development toward ensuring the climate.
Here you need to understand Mauborgne and Chan aren’t talking about predicting the future. of course, you got to take some risks but no one knows the future, right? Indeed, even blue ocean business strategy once in a while comes from projecting the actual pattern or future trends. All things being equal, they emerge from business experiences into how the pattern will change the worth to clients and affect the organization’s plan of action.
There are different case studies in the books based on this concept, like Apple iTunes. But I will try to talk about one recent change that I’ve seen. Think about OTT (Over-The-Top) platforms, Netflix, Amazon prime videos, Hotstar, etc. how these companies came into play, how they predicted human behavior. It’s not that theatre businesses are becoming extinct or due to Coronavirus these OTT’s are becoming so profitable (though Worldwide lockdowns helped these businesses to grow more rapidly) before pandemics they were doing a pretty business. They realized one thing that, albeit we like to go to the theatre with friends or families for movies but somewhat people needed something for daily basis. Like binge-watching, we heard this term before right? We needed something to enjoy with our better half while having our dinner. Regularly new shows, series, movies are coming that needed this kind of a platform. And they created a new market space. Now one thing to notice is that these companies didn’t predict the future, instead, they just understood the growing usage of the internet and how they can use it to provide value to us.
Go beyond the existing demand to create a new business strategy-
Lastly, I want to discuss with you one more thing which I mentioned before in the 3rd path of frameworks, which you need to look beyond your customers. Obviously, you need to give full priority to your current customers. You have to take feedbacks from them, regularly you need to satisfy them so that they become your returning customers. But, it’s always important to go beyond the existing demand. Think about the non-customers. Why they are not choosing your product.
There are 3 types of non-customers in our market.
1st type– ‘Soon-to-be’ these types of customers are seeing your product regularly or maybe becoming influence by your existing customers, and chances are pretty good that they are going to be your customer soon.
Your job is to focus on, why they didn’t choose your products yet. What is stopping them? Think about the commonalities between these kinds of customers.
2nd type- These are declining noncustomers, individuals who either don’t utilize or can’t afford to utilize your services. Either they are ignoring the products or receiving from one of your competitors.
What are the key reasons these noncustomers won’t utilize the items or administrations of your industry? Search for the commonalities between these customers. Then your job will be to change the common reaction of them.
3rd type- This is the farthest noncustomer of your business. They are unexplored of your brand.
That is on the grounds that their necessities and the business openings related to them have by one way or another consistently been accepted to have a place with different business sectors. It would make many organizations insane to know the number of noncustomers of this kind they are relinquishing.
Give priorities to these customers, what are they purchasing, what is the most relatable product that they are choosing from other companies. Then your job is to replace those with yours.
I will highly recommend you to pick this book, as it has many more valuable lessons with case studies that will help you to think practically about your next moves, impacts that can have, and create a blue ocean business strategy. Good luck!
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