MMU-DBA Advanced Marketing Marketing Strategy and Competitive Advantage

MMU-DBA Advanced Marketing Day 4 Organisational Resources and Competitive Advantage

The attractiveness of opportunities to the firms depends on the resources available to exploit them

 Resources

and Capabilities

The RBV argument Marketing Resources and competitive advantage

Creating

and Exploiting Marketing Assets Competitive Advantage

Value Chain and Value Network

Sustainable

Porters and Treacy and Wiersemas typologies Growth Strategies Blue Ocean (Kim and Mauborgne)

Fig. 6.1 Understanding the organisational resource base

The Resource-Based View

Resources & Capabilities Competitive Advantage

V aluable Rare Costly to Imitate Organized to Exploit

CA will be sustained if: other firms costs of imitation are greater than benefit of imitation the firm is organized to exploit advantages

Industrial Organization Some Authors:

Focus

(IO) Porter, Rumelt

Resource Based View (RBV) Barney, Wernerfelt Internaldescribes firms internal characteristics and performance Firms have idiosyncratic, not identical strategic resources. Resources are not perfectly mobile and therefore heterogeneous. This can be maintained over time

Externaldescribes environmental conditions favoring high levels of firm performance Assumptions Firms within an industry have identical strategic resources. Resources are highly mobile (easily bought and sold) and therefore homogeneous.

 Key

Concepts

Resources,
and

capabilities/ competences

Dynamic capabilities Diagnosing strategic capability:

value chain, value networks

Western vs. Japanese approach to strategy Core competencies (resources & capabilities)

1970s

Komatsu a $2.8bn co. making earth moving equipment, robots & Honda not yet semiconductors exporting cars to Honda as big in US US as Chrysler Canon making first Canon matched halting steps in Xerox market share reprographics

Komatsu made small bulldozers

1985/7

Strategic fit vs. leveraging resources Trim ambition to match available resources Strategy as positioning according to industry rules Planning as projecting the present forward rather than folding the future back Innovation as peripheral Narrow conception of maturity Portfolio management vs. business development

and to concentrate on Performance Gaps Improving quality Improving productivity Managing/reducing costs Improving business processes Improving market position Fending off competitors Improving information systems Improving distribution systems

Obsession with winning, quest for global leadership

Long attention span Motivation by

And to concentrate on Opportunity Gaps

communicating value (Internal Communication Vertical and Horizontal) Leave room for individual & team contributions

Stability over time

clear about ends, flexible about means Emphasis on improving competence and leveraging resources

Growing Leveraging technology Leveraging people resources Building a learning organisation Building new capabilities and skills Building synergy across businesses Building alliances with customers/ competitors Finding new opportunities

But it appears that there are no attractive industries

Competitive pressure is increasing in all industries Industry boundaries are constantly changing The profitability range is as great within industries as it is between industries

Robert Grant (2000) Contemporary Strategy Analysis

Market, cost or benefit advantages are based

On resources
Barriers to Entry

Patents Brands Retaliatory capability Market share Firm size Financial resources Process technology Plant size Low-cost inputs Brands Product technology Marketing capabilities

Industry Attractiveness Rate of Profit in Excess of the Competitive Level

Monopoly Vertical Power

Cost Advantage

Competitive Advantage
Differentiation Advantage

When the external environment is in a state of flux, the firm itself is seen
in terms of its bundle of resources and capabilities, and this may be a more stable basis on which to define its identity.

Hence a definition of the firm in terms of what it is capable of doing may offer a more durable basis for strategy than a definition based upon the needs the business seeks to satisfy This is done through an Internal Analysis
Robert Grant (2000) Contemporary Strategy Analysis

compared with others in the same industry Whether its through FIT or STRETCH - Competitive advantage is derived from the distinctiveness of an organisations capabilities

Some businesses achieve extraordinary profits

Their resources or competences permit

production at lower cost

or
generation of superior product or service at

standard cost

Strategic capability is the adequacy and suitability of the resources of an organisation for it to survive and prosper

Resources
Tangible resources physical assets of an organisation Intangible resources non-physical assets of an

Capabilities / Competences
The activities and processes through which an

organisation

organisation deploys its resources effectively

Financial Resources

In addition to Capital, cash, debtors/ creditors, suppliers of money (bankers, shareholders, etc) includes the firms borrowing capacity collection capacity The firms formal reporting structure and its formal planning, controlling, and coordinating systems Sophistication and location of a firms plant and equipment Access to raw materials Stock of technology, such as patents, trade-marks, copyrights, and trade secrets

Organizational Resources

Physical Resources

Technological Resources

SOURCES: Adapted from J. B. Barney, 1991, Firm resources and sustained competitive advantage, Journal of Management, 17: 101; R. M. Grant, 1991, Contemporary Strategy Analysis, Cambridge, U.K.: Blackwell Business, 100102.

Human Resources

Knowledge Trust Managerial capabilities Organizational routines

Innovation Resources

Ideas Scientific capabilities Capacity to innovate Reputation with customers Brand name Perceptions of product quality, durability, and reliability Reputation with suppliers

Reputational Resources

SOURCES: Adapted from R. Hall, 1992, The strategic analysis of intangible resources, Strategic Management Journal, 13: 136139; R. M. Grant, 1991, Contemporary Strategy Analysis, Cambridge, U.K.: Blackwell Business, 101104.

Fig 6.5 Marketing assets

Table 6.1 The top ten brand names

Source: Interbrand (1996, 2001, 2006)

How an organisation employs and deploys its resources Efficiency and effectiveness of physical, financial, human and intellectual resources How they are managed Cooperation between people Adaptability Innovation Customer and supplier relationships
Learning

1.

What opportunities 2. What possibilities exist for using exist for economising on existing resources the use of more intensely and resources in more profitable employment?
Eg concentrate marketing attention on fewer key power brands Unilever Kraft Foods

Eg Eisner at Disney

Film library via Video Studios via Touchstone Marketing theme parks

While resources are the source of a firm's capabilities/competencies, capabilities/competencies are the main source of competitive advantage But on their own few resources are productive

Productive activity requires the cooperation and

coordination of teams of resources A capability is the capacity for a team of resources to perform some task or activity

Production routines:
eg Toyota

Top Management routines:

see the leadership

And This Requires:

practices

of Jack Welch ?

Coordination between

R&D, Production & Marketing

eg Canon and M&M India

A culture of cooperation & commitment Trade-offs between efficiency & flexibility Economies of experience

The diversified corporation is a large tree. The trunk and major limbs are core products, the smaller branches are business units;
the leaves, flowers and fruit are end products. The root system that provides nourishment, sustenance, and stability is the core competence. You can miss the strength of competitors by looking only at their end products, in the same way you miss the strength of a tree if you look only at its leaves.

Core competencies are the collective learning in the organisation, especially how to coordinate diverse production skills and integrate multiple streams of technology Prahalad & Hamel (1990) a set of differentiated skills, complementary assets, and routines that provide the basis for a firms competitive capacities and sustainable advantage in a particular business
(Teece, Pisano & Shuen 1990: 28)

 Makes

a significant contribution to customer perceived value (or significant process and manufacturing cost advantage)
Provides access to a wide variety of

existing & new markets Is difficult for the competitors to imitate complex or sometime even a simple but elegant (SWA)harmonisation of production technologies & skills

Competitor differentiation

Sharp and Toshiba in flat screen display at the heart of the laptop Honda in engines & power trains for cars, motorcycles, lawn mowers & generators HP in measurement, computing and communications; 3Ms in adhesives, substrates and advanced materials.

Sony: Pocketability / Now they call 3 Cs Competing, Content and Connectivity

Fedex: on time delivery. Walmart: choice availability and value based on logistics.

Companies should be organised as a portfolio of competencies, building Marketing strategy around resources that meet key tests
Continually improve and upgrade resources, acquiring

complementary ones where appropriate

Examine scope of the business, maximising value from resources through their utilisation in new areas
Do not compete in markets where resource advantage

lacking

Fig 6.8 The resource portfolio

Fig 6.9 Developing and exploiting resources

Adapted from Hamel and Prahalad, 1994

 What

are your core competencies and/or core rigidities What actions are you taking to build your future core competencies?

How can a firm protect resources or capabilities

Unique Historical Conditions First mover advantages Path dependence Causal Ambiguity Causal links between resources and competitive advantage may not be understood Bundles of resources fog these causal links Social Complexity The social relationships entailed in resources may be so complex that managers cannot really manage or replicate them Patents

Offer a period of protection if the firms is able to defend its patent

rights Can be a two-edged sword as firms disclosure may decrease costs of imitation by other firms

The Question of Organization

a firms structure and control mechanisms must be aligned so as to give people ability and incentive to exploit the firms resources

examples: formal and informal reporting structures, management controls, compensation policies, relationships, etc.

these structure and control mechanisms complement other firm resourcestaken together, they can help a firm achieve sustained competitive advantage (3M Company rewards innovation and risk-taking)

 Strategic (Marketing) Assets - (Owns) Brands, patents, infrastructure, proprietary Core Competencies (Knows) skills & unique capabilities Core Processes (Does) Activities, routines,
Brand building

standards, customer data

Dell (Mass Customisation), John Hardy (Sustainable processes -> brand)

Hamel (2001)

 Managers

of (NPD) projects face a

paradox: Core capabilities simultaneously enhance and inhibit development Examined a range of NPD projects some of which had close and some a lowerfit with core capabilities Eg. DIGITAL, KODAK..

Skills & knowledge

Four dimensions vary in terms of ease of change

1. Technical systems 2. Managerial systems

Technical systems

Values and norms

Managerial systems

3. Skills and

knowledge 4. Values and norms

Increasing difficulty to change

Four dimensions to the knowledge set 1. its content is embodied in employee knowledge and skills (firm specific knowledge & scientific understanding) 2. Embedded in technical systems: accumulating, codifying and structuring the tacit knowledge in peoples heads. Greater than the sum of its parts/ 3. Guided by managerial systems: formal and informal ways of creating and controlling knowledge 4. The values and norms associated with the various types of embodies and embedded knowledge and with the process of knowledge creation and control

Tool: The Value Chain and Value Networks

Source: M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, 1985. Used with permission of The Free Press, a division of Simon & Schuster, Inc. 1985, 1988 by Michael E. Porter. All rights reserved.

Exhibit 3.6

 To To

diagnose strategic capability understand how value is created or lost in terms of the activities undertaken

The value chain describes the activities within and around an organisation which together create a product or service

 Identifies

clusters of activities providing particular benefit to customers Highlights activities which are less efficient and which might be de-emphasised or outsourced Requires managers to think about the role of such activities Can be used to identify the cost and value of activities

Source: M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, 1985. Used with permission of The Free Press, a division of Simon & Schuster Inc. 1985, 1988 by Michael E. Porter. All rights reserved.

Exhibit 3.7

The value network

Set of inter-organisational links/relationships necessary to

create a product or service

Specialisation of roles
Underpins excellence in creating best-value products

Need to understand whole process

Where cost/value is created in supply/distribution chains How to manage links to improve customer value How product quality is a function of linked activities of

manufacturer, suppliers and distributors

Order Du Pont Du Pont (Fibers) (Fibers) Milliken Milliken (Fabric) (Fabric) Delivery

Order Levis Levis

Order Sears Sears (Retail) (Retail)

Order Customer Customer Delivery

(Apparel) (Apparel)
Delivery Delivery

Competition is between networks, not companies. The winner is the company with the better network.

Order Content Content Developers Developers Software Software Guys Guys

Order

Order Air Asia Air Asia /TGV/ /TGV/ GSC GSC

Order Customer Customer

Network Network Maxis/Digi Maxis/Digi

Delivery Delivery

Delivery

Delivery

Competition is between networks, not companies. The winner is the company with the better network.

Where are cost and value created? Which activities are vital to an organisation? Where are the profit pools? Make or buy?
Retain direct control of core capabilities Outsource less important activities Potential profits at different parts of the value network Availability of competences to compete in these areas Outsourcing Develop competence in influencing performance of

Who are the best partners?

What kind of relationships are required?

other organisations

Promote a learning organisation

Recognise intuition of people Accept conflicting ideas Experimentation as the norm

Add activities to support learning, e.g. venturing business units Manage organisational knowledge

Develop spiral of interaction between tacit and explicit knowledge Question core rigidities

Need right culture and structure

Resource based perspective states Competitive advantage is derived from strategic capabilities which are identified through Internal Analysis
Strategic capability comprises tangible and intangible resources deployed via capabilities / competences For sustainable competitive advantage strategic capabilities must be valuable, rare, robust or non-substitutable/ inimitable

Value chain/value network to understand cost and value creation In an ever changing environment Management of strategic capabilities involves stretching capabilities and building dynamic capabilities

MMU-DBA Advanced Marketing Day 4 Organisational Resources and Competitive Advantage

Today's Agenda Porters Generic Strategies Treacy & Wirsemas 3 Value Disciplines Being Best of Both or stuck in the middle ? Growth Strategies

Market Leaders and

Challengers

Blue Ocean Strategy

Through External Analysis we analyse the environment / industry / competitive factors that can affect a firms profits In Organisational Resource Analysis we discussed firm-specific factors that impact on a firms competitive advantage and now we further analyse firm specific factors vis--vis rivals

So we are concerned with where companies

position themselves relative to rivals in order to obtain competitive advantage

External

Are you in an attractive market? ie one where average player makes an economic profit

Internal

Have you got a competitive advantage?

Keynon and Mathur A strategic business unit is a part of an organisation ague that competitive for which there is a distinct external market for advantage is not so goods or services that is different from another SBU much at the SBU level but from the offering and particularly from External Internal Future Offerings. Same customer types Similar products/services

Same channels

Similar technologies

Similar competitors

Similar resources and competences

Support activities

Firm Infrastructure
M Human Resource Management ar gi n Technology Development Procurement

Operations

Inbound Logistics

Marketing & Sales

Outbound Logistics

Service

Primary activities

M ar gi n

Displays total value comprising value activities & margins Divided into primary and support activities Useful framework for analysing opportunities for Resource allocation Differentiation Cost reductions

Value chain for the firm and value chain for the industry

Stuck in the Middle ?

SOURCE: Adapted with the permission of The Free Press, an imprint of Simon & Schuster Adult Publishing Group, from Competitive Advantage: Creating and Sustaining Superior Performance, by Michael E. Porter, 12. Copyright 1985, 1998 by Michael E. Porter.

Figure 4.1

Cost-leadership strategy the firm strives to be the lowest-cost supplier and thus achieve superior profitability from an above-average pricecost margin. (Product) differentiation strategy the firm strives to differentiate its product (or service) from rivals products, such that it can raise price more than the cost of differentiating and thereby achieve superior profitability. Focus strategy the firm concentrates on a particular segment of the market and applies either a cost-leadership or a differentiation strategy.

 Can

still earn returns when rivals have competed away profits Buyers can only bargain down to level of next most efficient competitor Have flexibility to cope with price increases from suppliers Scale economies deter new entrants and make substitutes less attractive

Economies of scale and learning effects are potentially significant, but no firm seems to be exploiting them Opportunities for enhancing the products perceived benefit are limited by the nature of the product
(commodities --- garments sector in Malaysia was getting provided the opportunity for Walmart and Dell then.

Consumers are relatively price sensitive and are unwilling to pay much of a premium for enhanced product attributes
(eg. selling to government - In the food-retailing in Malaysia

commoditised during/post asian crisis even a brand like British India was selling at RM 20/unit)

Jusco is also forced to ???

(Bezanko 2000)

 Disaggregate

the firms value chain into separate activities (processes)

Establish the relative importance of

different activities in the total cost of the product Compare the costs by activity Identify the cost drivers Identify linkages: how costs in one activity influence costs in another Identify opportunities for reducing costs
(increase volume, reduce labour costs, outsource)

 An

integrated set of actions taken to produce goods or services (at an acceptable cost) that customers perceive as being different in ways that are important to them
Nonstandardized products Customers value differentiated features

more than they value low cost

 Brand

loyalty means buyers are less price sensitive and therefore less likely to move to lower cost rivals or substitutes Customer loyalty and uniqueness create entry barriers Higher margins provide protection against powerful suppliers

1. 2. 3.

Raises the firm above intense price competition rivalry Uniqueness and customer loyalty act as a barrier to entry Able to ward off threat of substitutes.

Genetic cures vs Conventional Drugs ?

1. 2.

Reduces bargaining power of buyers. Increases bargaining power with suppliers

Product/service differentiation (based on levels of offering) Fig 11.7

Inbound Logistics:
quality of components &

Operations: Outbound logistics: Marketing & sales: Service: consumer credit (What are your classic examples?)
building brand reputation faster delivery defect free products (6 sigma)

materials

The worst strategic error is to be stuck in the middle or to try simultaneously to pursue all the strategies. This is a recipe for strategic mediocrity and below-average performance, because pursuing all strategies simultaneously means that a firm is not able to achieve any of them because of their inherent contradictions. (Porter, 1990, p.40).

Porter argues that a strategy of differentiation

advantage is usually incompatible with the pursuit of cost advantage because higher quality or better performance products cost more to produce:

- e.g. more expensive components - e.g. better trained or more highly skilled labour - e.g. higher advertising and promotion costs Therefore if firms pursue best of they are likely to
lose out to cost leaders and and top end competitors; also suffer from a blurred corporate image

Why? High quality products drives market share which gives scale and learning benefits and reduces average costs The rate at which accumulated experience reduces costs is greater for higher quality products Inefficiencies muddy the relation between cost position and differentiation position: Porter may have been observing inefficient firms, not a true trade-off between quality and cost Consumers do not think in terms of polar opposites? Think of a trade-off in terms of value for money (e.g. Hotels)

Bottom of the Pyramid Market As an extension of Cost Leadership ?

Fortune at the Bottom of the Pyramid - Prahlad

Operational Excellence Best total cost

Product Leadership Best product

Customer Intimacy Best total solution

Figure 6.2

Value disciplines

Providing reliable products and services at competitive prices with minimal difficulty and inconvenience (Similar to Cost ?) Eg Dell, Air Asia ?!

Segmenting and targeting precisely and then tailoring offerings to match exactly the demand of those niches. Combine detailed customer knowledge with operational flexibility. Lifetime profit vs single transaction

Eg Nordstrom, Home Depot, Ritz Carleton

Offering customers leading-edge products and services that consistently enhance the customers use or application of the product, thereby making rival's goods obsolete Speed to market
Eg Nike, Sony, 3M

Or become the master in two! Eg Toyota: operational excellence + product leadership

Competitive Cost Advantage Product & Marketing Standardise products

Position Benefit Advantage Customise products

Production

Mass-production Inventory control Design for ease of manufacture Process innovations

Make to order Anticipate demand Create customer benefits

Engineering & design

R&D

Product innovation

HR

Transactional leadership

Transformational leadership

A growth market means a growing product market. Attractive to companies because: Gaining share is easier Share gains are worth more Price competition is likely to be less intense Early entry may be necessary to keep pace with technology Strategic options depend on market position Market leader (defensive) Market challenger (aggressive)

83

Is it conventional wisdom? Normally used to guide resource allocation decisions Reality growth markets represent opportunities but also substantial risks and challenges

Firms to beware of shakeout phase! A market is neither attractive or unattractive because of high growth REAL QUESTION: CAN THE FIRM EXPLOIT THE OPPORTUNITIES PRESENTED BY MARKET GROWTH TO GAIN COMPETITIVE ADVANTAGE?

84

 Overcrowded

market (market share) providing high charged environment for a shakeout Inadequate distribution Inadequate resources Key success factors change Leap frogging competitor Market does not grow!!!!

85

 When

firm is able to ; Develop strong customer loyalty Develop broad product line Create delayed obsolescence Possess experience curve advantage Possess absolute cost advantage Possess high initial price structure

86

Maintain

leading position in view of rising competitors, fragmentation of market segments and threat of product innovation.
87

 Seek

to improve on organisational performance through expansion of activities.

Achieved through Market Expansions or taking

sales from competitors (Confrontation) Five Confrontation Strageiges (Koter and Singh 1981)
Frontal attack Flanking attack Encirclement attak Bypass strategy Guerilla tactics

LEAPFROG STRATEGY FLANKING ATTACK

Target competitor

FRONTAL ATTACK

CHALLENGER

ENCIRCLEMENT STRATEGY
89

Figure 11.9 Market challenger strategies

Figure 11.10 Frontal attack

Figure 11.11 Flanking attack

Figure 11.12 Encirclement attack

Figure 11.13 Bypass strategy

Figure 11.14 Guerrilla tactics

Kotler and Singh suggest six holding Strategies Fortification or Position Defence Erecting barriers to copy and/or entry (differentiation, brand building etc)

Figure 11.16 Position defence

Figure 11.17 Flanking defence

Figure 11.18 Pre-emptive strike

Figure 11.19 Mobile defence

Figure 11.20 Contraction (focus) defence

FLANKER STRATEGY PROACTIVE FLANKER STRATEGY - REACTIVE

COMPETITION OR POTENTIAL COMPETITOR

FORTRESS CONFRONTATION OR POSITION STRATEGY LEADER PROACTIVE/REACTIVE OF DEFENSE STRATEGY

CONTRACTION OR STRATEGIC WITHDRAWAL

LEADER
Market expansion strategy
102

Selection of any one or combination of strategies depends on :

Market size and customer characteristics Number and relative strengths of competitors or potential competitors in that market Leaders own resources and cabalities / competencies
103

COMMON STRATEGIC TRAPS DURING MARKET SHAKEOUTS Failure to anticipate transition from growth to maturity No clear competitive advantage Assumption that an early advantage will insulate the firm from price or service competition Sacrificing market share in favour of short-run profit.
104

 Mature

markets are characterised by fewer stronger firms that have survived the shakeout phase At this stage potential customers have adopted the product and rate of sales growth declines Primary objective HOLD existing customers Declining markets are characterised by low sales due to customers,or obsolesence of product category. Options harvest or consolidate or divest.
105

When ?
Market leader in a mature or declining market. Costs exceed benefits of building Significant barriers to entry

Strategic focus
Monitoring the competition Confronting the competition Competitive equilibrium and implicit collusion Avoid price wars !
106

Attractive conditions
Market is mature or declining (dog products) Core of loyal customers Future breadwinners exist When restructuring is more profitable than divestment Increase cashflow from current sales rather than

Strategic focus
Eliminate R&D expenditure Product reformulation Rationalise product line Cut market support Maintain or Consider increasing price
107

When ?
Small company with limited Resources with large competitors dominating main segments Niches that can provide an Opportunity Major players are neglecting the needs of some customers Strategic focus

Market segmentation Focused R and D Focused Differentiation

108

Attractive conditions
Loss-making products or business drain on resources Often low share in declining Strategic focus markets Get out quickly Costs of turnaround exceed BUT do not benefits damage Removal will not significantly reputation if more affect sales of other products products/brands Other companies value business exist significantly higher than current firm Minimise the costs
109

 Marketing Range

Strategy formulation should adapt to evolving markets. of strategic options for growing, mature and declining markets. simply assume that growing markets are attractive but not declining ones.

Cannot

 The

supply exceeds demand globalization accelerated commoditization of products and services increasing price wars shrinking profit margins brands are becoming more similar

Imperative for BOS

select based on price

Two worlds

Two worlds Red Ocean Strategy

Compete in existing market space. Beat the competition. Exploit existing demand. Make the value-cost trade-off.

Blue Ocean Strategy

Create uncontested market space. Make the competition irrelevant. Create and capture new demand. Break the value-cost trade-off.

Align the whole system of a Align the whole system of a strategic firm's activities with its firm's activities in pursuit of choice of differentiation or low differentiation and low cost. cost. VALUE INNOVATION

BOS Logic: The Core Principles

Reconstruct Market Boundaries overcome believes.
Reach beyond existing Demand go for uncontested space. Get the strategic sequence right value [innovation] first.

COST

VI VI
VALUE

BOS Logic: Reconstruct market boundaries

Boundaries of Competition
Industry

Head-to-Head Competition
Focuses on rivals within its industry

Creating New Market Space

Looks across alternative industries

Strategic Group

Focuses on competitive position within strategic group Focuses on better serving the buyer group

Looks across strategic groups within its industry Redefines the buyer group of the industry Looks across to complementary product and service offerings that go beyond the bounds of its industry Rethinks the functional-emotional orientation of its industry

Buyer Group

Scope of Product and Focuses on maximizing the value Service Offerings of product and service offerings within the bounds of its industry Functional-emotional Focuses on improving priceOrientation of an performance with the functionalIndustry emotional orientation of this industry Time/Trends Focuses on adapting to external trends as they occur

Participation in shaping external trends over time

BOS Logic: Reach beyond existing demand

Core Customer

Noncostumer

Soon-to-beNC

Refusing Customer

BOS Logic: Get the Strategic Sequence right

Buyer utility Is there exceptional buyer utility in your business idea?

No Rethink YES
Price Is your price easily accessible to the mass of buyers?

YES
Cost Can you attain your cost target to profit at your strategic price?

No Rethink

No Rethink

YES
Adoption What are the adoption hurdles in actualizing your business idea? Are you addressing them up front?

No Rethink

YES

A commercially viable Blue Ocean Strategy

The case of Accor's Formule 1

The value curve of Formule 1 in the French Low Budget Hotel Industry

References
W. Chan Kim, Rene Mauborgne, Blue Ocean Strategy, 2005, Havard Business School Press. http://www.blueoceanstrategy.com http://www.hotelformule1.com