Blue Ocean Tsl 2009

Strictly Private & Confidential

Blue Ocean StrategyIntroduction, Jan 09

Internal presentation


Agenda (45min)

• What is Blue Ocean Strategy?

• Samples/Illustrations– PC industry 2000– Sony Walkman History– Music industry today..– Airlines in Europe

• How do I get involve?


What is Blue Ocean?

• What is Red Ocean?

• What is Blue Ocean?

• Ignore Current Rules in the Market

• Customer Centric Thinking

• Value Innovation

• Extend Customer Value


US Naval Strategy

• Google earth..

• Where is the Red Ocean for China?

• Where is China’s Blue Ocean?– Another space? – Another timeline?– Another battlefield?– Another market?


• A PC Mouse

• Ship tickets to Macau

• MK CK sales

• Baleno’s Polo shirt

• Commodities, Can only compete on price

Common Samples of Red Sea/Ocean


PC market in 2000

• Market Leader: Compaq PC

– 1.5ghz Pentium III PC, 512MB, 10GB HD, Windows, Keyboard, Mouse

– Sold at Broadway, Golden Shopping Center

– Margin • 5%

– Credit Term?

Value for Customer


Credit days for Compaq

Day 1 Order Pentium III @USD150

Day 20 Installed onto PC motherboard

Day 30 Ship to Dealer

Day 35 In Dealer stock

Day 35+90 days credit to dealer

Collect payment

Within 90 days the dealer sells the product


Blue Ocean Player: Dell

• What does the customer wants?– Newest Technology

– Lowest price

– DIY/Customize

– Online

– Quick delivery

• Dell.com– Pentium IV, 20GB HD,

– Lowered Price,

– Better package

• Extending Value for Customer

Value for Customer


Credit days for Dell

Day 1 Erwin order on Dell.com; Pentium IV (@US150)with Larger HD 20GB

Day 1 Order from Intel Factory; IBM stock house next door, robot ships newest component over

Day 30 Visa payment arrived

Zero inventory?


How Does the Model work?

• Factory next to Intel, IBM • Beyond JIT supply,• Payment terms?• How many days• Margin

– 15%

• Econ of Scale and Econ of Scope

• What happened to Compaq?


Sony Walkman

• Market Leader: 20 years

• Cassette, MD, CD..

• Offer Value for Customer:– Portable– Style/Fashion– Good Quality

• Sound• Design

– Compatible– Self Record– Music selection


Music Industry

• CD Music Publisher– Universal, BMG, Sony, Emperor

• CD Retailer– Tower Records– HMV

• Value for Customer– Top Singers, Top Songs Charts– Thousands of CD Selection– Color Poster included in CD– Try at store


Demo Apple iTune/iPhone


Blue Ocean: Apple iTune/iPod

• What does the Customer wants?• How does Apple Extend Customer Value?

– Style/Fashion?– Why do I have to buy the “whole CD”?– How much do I “value” each good song?– Library for Life?– Buy once, use anywhere, Home, Street, Office, Car any

device– Millions of Songs– DIY– Community


How Does the Model Work?

• How do they do it?• Customer life cycle:

– Buy 1st Low Cost iPod (any price point), Make a friend– iTune Buy Songs at Value price, (many songs overtime)– Buy 2nd iPod– Buy iPhone..

• Launch many iPods (cover all price point, always stylish)• Get a lot Music• A Simple Life with Apple• A fashionable Life with Apple• Is Apple a Hardware company? Or a Software company?

– Or a Service company?

• What happened to Sony Walkman? (the hardware company)• What happened to the Music Industry? (the software companies)


Travel in Europe in 2000

• Red Ocean– Large Airlines– Expensive flights– Same boring service– Same boring food– Same lounge– Long wait, Long travel time to airport

• E.g. travel from London to Basel• Guess how much is the ticket?


Blue Ocean Player: Easyjet

• Demo• Guess, how much it

takes to fly from London to Basel?


What does Easyjet offer

• Extend Customer Value– Low Cost– On time


How Does the Model Work?

• How do they do it?• Small Airport = Lower tax, lower fee• EasyJet become the most important customer at that airport =

good service– Have you fly Dragon air in HK airport?

• Focus on the Core value for customer• Cut everything else

– No drinks, no seats assignment, 1 luggage only, no magazine..

• Technical:– Airbus flying range, 3 flights per day, least idle time,

• Why does Oasis Airline fail?– They choose to Fight in the Red Ocean

Summary

• Blue Ocean Strategy: – Create Un-contested Market Space

– Make your Competition Irrelevant

• Value Innovation• Customer Centric Thinking

– Extend the offering

• Samples:– Apple iTune/iPod: ease of purchase, ease of use, reasonable price,

style, large selection, community, DIY.. Customer Life Cycle

– Dell: extend the low price of material to the customer, DIY, quick deliver of most high tech equipment, Econ of scale/Econ of scope

– EasyJet: CHEAP ticket, ease of use, cut away not needed elements



• What are the rules? (of the Red Ocean)– Ignore them

• Ask:– What do the Customer Wants?– Extend the Value Offering

How do I get involve?

4 sessions in this ”Blue Ocean” course

• Intro• Live Sample• TSL Sample• Case Study

• A way of thinking• Take away:

– Walking into a store, observe– What does the Customer Value?– How to extend the value


TSL Challenge

• MK Red Sea

• Product Red Sea


Moving Forward!!

1st Generation HK Manufacturing Entrepreneur

Modern Retailer for Chinese

Low Cost High Value

Skill and Knowhow in Production Design, Fashionable Branding

Mass, Economy of Scale Targeted, Economy of Scope

Vertically Integrated Manufacturer Quick Response Efficient Retailer

Supplier driven business model Customer Value driven business model

Traditional Apprentices System Re-engineered Corp Governance

Trusted Brand name Trusted Brand name

Believe in Service, go the extra step Believe in Service, go the extra step

Long term loyal customer Long term loyal customer

Care and Love for the Customer Care and Love for the Customer


Blue Ocean Tsl 2009

Business

Transcript of Blue Ocean Tsl 2009