Red Ocean and Blue Ocean Approach

Red Ocean and Blue Ocean Approach Introduction â€Å"Blue Ocean Strategy† by W. Chan Kim and Renee Mauborgne is a strategy that challenges companies to distance itself away from fierce competition by establishing uncontested market space that makes existing competition irrelevant. One of the reasons why the authors have used the colours red and blue is to describe the market. Red ocean is the market space where industry boundaries are defined and known. The red ocean contains a massive conflict between companies where they are constantly trying to outperform each other to achieve a greater share or demand. Kim and Mauborgne explains in an interview that when market spaces become crowded with competitors, companies try out perform each other and profits and growth is greatly reduced due to cutthroat style competition which turns the red ocean bloody. In contrast, blue oceans is the unknown market space where it is unaffected by competition and demand is created rather than fought for. In blue oceans, competition is not relevant because the rules or barriers to the market space is not set yet and is often waiting to be set. The Authors uses the blue ocean analogy to describe the uncontested market space with no competitors and the opportunity to explore. The analogy of a blue ocean can be associated with profitability and growth being â€Å"vast†, â€Å"deep† and â€Å"powerful†. Traditional approaches to competitive strategies are highly influenced by Michael E. Porter. Kim and Mauborgne present to us in their book a fresh approach to make the competition irrelevant. In this paper I will discuss the differences between conventional red ocean strategies which are influenced by Porter and Kim and Mauborgnes blue ocean strategy. Furthermore, the paper will discuss the differences between the SWOT analysis and the four actions framework. Competing in existing market space versus Creating new market space The red ocean represents the existing market space where there is always a constant intensity of rivalry to fight for market share. To successfully operate in a red ocean, it is important for companies to conduct competitor analysis to allow them to stay updated on what their competitors are doing and what they are planning to do. Red ocean strategies represent approaches to protecting and stealing market share from competitors. According to DAveni, market share can be stolen by companies satisfying their competitors customers better. To compete in the existing market space, companies need to mould their services or products in line with the customers liking through refining existing products or creating new to the world products. However, the bloody cutthroat competition of the red ocean most often causes companies to develop similar or replications of products or services of the competitor that has done well. In the red ocean where competition is based on price and quality, being a first mover is an important advantage because by being flexible a company can adjust easily to external changes such as customer demands and trends. By being a first mover, the company gets benefits such as low costs and economies of scale. I think this is also the reason why the red ocean is so bloody because similar products and services have been refined and replicated over and over again with low cost, it has caused companies to be afraid to look into new options and therefore in a constant battle to fight for market share by cutting profit margins lower and lower. For the companies that succeed in gaining a competitive advantage by being a first mover, it is important for them to exploit the opportunity of that advantage as much as they can because very soon the competition will catch on to it. The tradition theory to competing in existing market space is focused on building your company through analysing competitors. In contrast, Blue Ocean refers to all the industries that are not in existent. In the opening chapter of the Blue Ocean Strategy book, Kim and Mauborgne suggest that the only way to beat the competition is to stop trying to beat the competition. This is a complete contrast to conventional red ocean strategies because instead of analysing competitors, and try out perform them, Blue Ocean Strategy encourage companies to differentiate or break away from the existing market space, hence making competition irrelevant. The authors suggest that there are many ways to create blue oceans. In few cases, companies can establish completely new industries. An example of this is what eBay did with online auctioning. Blue ocean strategy says a company can create a blue ocean market space by innovating a new product or service mainly focusing on new to the world services. However I believe developing new to the world services come with high risk and expenses but if done correctly can be very profita ble. Kim and Mauborgne argue that most companies tend to adapt to new trends rather than trying to shape new trends. What the authors mean by this is that companies make actions directed at keeping up with trends and dont look across time or look at the big picture. They argue that to create a untapped market space, companies need to find trends that are observable today and look at the big picture and see what happens to the value it will have in the future. A prime example of how a company successfully executed this strategy would be Apple. Apple studied and monitored the growing trend of music sharing over the internet during the last decade through software used illegally such as LimeWire and Kazaa. The trend of music sharing became clear to Apple and they took the opportunity and created the online iTunes music store in 2003 which distributed music legally. Red Ocean and Blue Ocean approach to industry boundaries Red ocean markets are large and the rate of product innovation is low. Therefore the market is usually heavily populated by competition and there are a set of rules that is known. In the hostile red ocean environment, companies strive to outperform each other in order to control market share and demand. As the market space gets crowded, growth and profits are greatly reduced and a price war is begun. Competition based strategies have been the main fundamentals of strategic thinking over the past decades and as a result, most companies benchmark themselves towards competition. In contrast, blue ocean strategy emphasises on finding and exploiting market space. The authors argue that companies must realise that in order to be successful long-term, they need to stop competing and benchmarking the competition. It is important for companies to view the competition from a broad perspective and consider industries that produce alternatives with the same functions and forms to satisfy the end customer. According to Kim and Mauborgne, most companies concentrate on improving the competitive position within a segment and focus on outperforming competition in the same segment. They argue that is it imperative to understand the actions of competitors in other segments not only the one your company is in. To be able to create a blue ocean environment, companies need to understand the factors that influence the customers decisions to change segments such as price and performance. Blue ocean strategy also focuses on looking across chain of buyers. By changing the industry tradition of which buyer group to target and looking across the chain of buyers, companies can get an insight on how to focus on overlooked groups of buyers. Kim and Mauborgne discuss the importance of considering the whole chain of buyers including purchasers, actual users and influencers. By focusing on all of these groups the company can break away form the competition and create a blue ocean environment and the competition would become irrelevant because the industry boundaries are waiting to be created. An example of an Australian organisation that has used this strategy is wine manufacturer Casella Wines. Casella Wines broke free from the boundaries of the domestic competition and moved towards the US market through implementing blue ocean strategy and targeting a segment which was not tainted yet which was the non-wine drinking population. Differentiation and Cost cutting The traditional red ocean view focuses on the importance of creating just one competitive advantage. Porter (1980) has developed recognised theories that describe the three types of competitive strategies as cost leadership, differentiation and focus. Porter emphasises the danger of a company being in the middle of the strategies and the importance of clearly selecting one strategy. If an organisation tries to operate with multiple strategies, it will supposably lose its competitive advantage and focus.

The Soaring Juvenile Crime Rate :: juvenile delinquency crime

The Soaring Juvenile Crime Rate   Ã‚  Ã‚  Ã‚  Ã‚  It is comforting to know that, according to recent crime statistics, crime rates are dropping among adults. However, for teens the crime rate is soaring. Between 2000 and 2004, the rate at which adults age 25 and older committed homicides declined 22%; yet the rate jumped 16% for youths between 14 and 17. This age group surpassed the 18 - 24-year-old group in the early 2000's as the most crime-prone. (Between 1966 and 2001, 18 - 24 showed a 62% increase in homicides; 14 - 17 showed a 124% increase in murders.) It is this age group that will be booming in the next decade (currently 39 million under 10).   Ã‚  Ã‚  Ã‚  Ã‚  However, the American Civil Liberties Union, in a fact sheet on juvenile crime published in mid May of this year, stated that contrary to public perception, the percentage of violent crimes committed by juveniles is low. According to one estimate, only 13% of violent crimes are committed by young people (Gallup Poll Monthly, Sept. 2004). The ACLU further suggests that the public also holds greatly inflated perceptions about the violence of today's juveniles, claiming only about 0.5% of young people commit violent crimes. ( ³ Crime Time Bomb, ² U.S. News & World Report, March 25, 2006)   Ã‚  Ã‚  Ã‚  Ã‚  Current social trends do little to contradict the dire predictions made about youth crime rates. Nearly all the factors that contribute to youth crime -- single-parent households, child abuse, deteriorating inner-city schools -- are getting worse. At the same time, government is doing less (spending less) to help break the cycle of poverty and crime.   Ã‚  Ã‚  Ã‚  Ã‚  Predicting a generation ¹s future crime pattern is, of course, risky. Especially when outside factors remain unpredictable (Will drug use be up or down? Will gun laws be tightened?). Also, from year to year, crime rates can fluctuate much like the stock market. What goes up generally comes down, and what goes down generally comes back up.   Ã‚  Ã‚  Ã‚  Ã‚  It is probably no surprise to hear that crime rates among juveniles vary across race (structural limitations/discrimination, self-fulfilling prophecy, etc.). Minorities, especially Blacks, have a higher arrest rate for violent

Virgin Usa – Pricing Strategy

Marketing [pic] Virgin USA Francesco Marani Problem Statement Virgin mobile is entering the US mobile market. Low brand recognition in USA and limited financial resources for advertisement represents a constraint because to enter successfully in such a market Virgin needs to swiftly attract its potential target customer, in order to establish a critical mass and financial strength to defend itself from incumbent and/or other potential entrants (price-wars, dumping, etc†¦). The profile of target customers, youth in between 15 and 29 years old with low credit credentials and high income / price elasticity (sensitivity to changes in price and income), is in conflict with the need to retain customers for a minimum period of 17 months as currently in the market ($ 370 / [52-30] = 17), in order to breakeven recovering the Cost per Acquisition (CPA). Situation Analysis Competition – the Mobile Industry in USA: there are 6 national carriers, as well as other small regional providers. The market is overcrowded, mature, highly competitive and concentrated (3 largest carriers covering about 59% of the market – Exhibit 1); requiring large capital expenditure (CAPEX). High churn rate contribute to create uncertainty on the profitability of clients particularly because the carriers are perceived as utility providers rather than service providers. Advertisement expenditure by market leaders is high in order to capture unsatisfied customers. Customer – Market: Most of the new subscribers of mobile services (117 Mln in 2001) opt for a contractual agreement with mobile carriers, which implies hat the bulk of customers are locked into an agreement and potentially dissatisfied. Carriers make money with hidden fees, taxes and unexpected charge (calls during peak time and in excess of monthly allowance). Customer confusion, dissatisfaction and homogenous offer could be some of the reason behind the significant churn rate. We can assume that a significant chunk of the remaining subscribers (13 Mln) are mainly concentrated within the younger part of the population, in many instance unable to sign up for a contract given their lower credit credentials. Virgin aims at attracting 1 Mln of subscriber on the first year and is partnering with MTV, specialized magazines and selected trendy stores consistently with its target customers. Company – Virgin Value Preposition: The Virgin brand in other European market is associated to value for money, innovation, a hip and trendy image, and also ability to shake industry convention and status-quo. Virgin is planning to enter the USA market aggressively, where it has almost no brand recognition, focusing on understanding and meeting customer needs rather than operating the physical infrastructure (MVNO approach). By trying to differentiate its offer and value preposition from the flat and boring offer of established carrier Virgin is trying to change the concept and the perception of such service. Final goal would be reducing dissatisfaction and hence the churn rate, potentially increase the average spending per customers by in other entertainment services. Context: Virgin target customers are the youth between 15 and 29 years old, with less stable economic and consumer behavior, but a higher attitude to spend. On a comparative basis, penetration rate is expected to growth the most on Virgin’s target customer. Additionally revenues generated by entertainment services are expected to grow exponentially (annual growth above 100%) creating an additional revenue stream. Alternatives Clone the industry Prices: Adopting the same price structure available in the market seems to be a strategy consistent with the need of a simple communication, while differentiation will be based on transparency, attention to customer needs and additional services. Such price replicating strategy can be difficulty defendable in the long term. The owners of the network infrastructure, which in some instances is also a provider of mobile services, could easily cross-subsidize their mobile business and reduce its CPA to compete aggressively with Virgin, neutralizing its strategy given their superior rental network cost advantage. Any price war is likely to create an immediate change in customer preferences, in particular Virgin’s target customer (15- 29 years) is likely to be strongly affected given their traditional high sensitivity to prices change (price elasticity typically high). Price below the Competition: The option to adopt a quasi-similar pricing structure, with an exception for the bucket of consumption in between 100 and 300 minutes, has the same pros and cons of the one before mentioned, in addition to increase the probability of triggering an aggressive competitive reaction by incumbent (price wars). Both the above options fail to address three significant aspects: ? The high churn rate, which is one of the main problems in the service industry, is not addressed by any of the mentioned strategy. The limited advertisement budget may fail to create an impact and convey rapidly a clear message to any potential customers. ? The post-paid contract may be difficult to implement using the planned distribution channel. Lower sales commission could also implies less prepared sales representatives, which may fail to properly complete paperwork related to credit checks. Recommendations Virgin should adopt a brand new approach entering the mobile market to quick ly capture the favor of unhappy customers, as well as people unable to sign a contract given their low credit credentials. No contracts (pre-paid only), no hidden fees & taxes, an aggressive price strategy within the 100 – 300 minutes of consumption as a monthly allowance, with no difference between peak and off-peak charges. The average cost per minute in the industry is at the moment around 12 cents ($ 52 average bill per month / 417 min). By analyzing different possible scenario, including different retention rates and rebates in line with the market (Exhibit 2), Virgin can produce a positive Lifetime Value (LTV) offering a tiered price structure, by charging 0. 19cents for monthly usage below 100 minutes, 0. cents in between 100 and 200 minutes, or 0. 06cents between 200 and 300. This solution has been obtained by resolving the LTV formula, leaving the price as an incognita, and assuming a 6% churn rate, a rebate from client of the mobile cost at $30 (using similar proportion of rebate as other competitors), ? PROs: difficult to be replicated by competitors in the market in the short term. It best suits the need of youth people unable to pass credit checks, as well as teenagers and parents needs because it naturally limit their maximum spending in advance. LTV positive since the beginning and CPA at $160 (refer to the next section for further consideration on the CPA). Virgin can further reduce the cost per minute charges if we increase the upfront cost billed to customer for the phone (Exhibit 3), in case competitors start competing aggressively. ? CONs: pre-paid are typically associated with higher churn rate, which can result in a net loss for the carriers before having recovered the CPA. Pre-paid customer in some instances use the mobile phone less than traditional users. An appropriate (easy to reach and cheap) infrastructure needs to be in place to recharge the phone. Implementation Plan Price: an aggressive tiered price strategy, with price decreasing at increased consumption simple to communicate and sensitively lower than competitors (Exhibit 4). Any minutes in excess of 300 minutes can be charged at the same cost per minute applied for the 200 – 300 minutes of monthly consumption. No difference between peak and off-peak charges. Contract: no contract, no hidden fees and taxes. Every user will be charged only an upfront cost for the phone, which in an aggressive scenario is set at $30, (i. e. half of the minimum amount currently charged by other carriers – Exhibit 5). Communication: Virgin is entering the USA mobile market using selected affiliated partner (MTV, selected magazine, etc) consistent with its target customers. The planned advertisement investment is $60 Mln, lower than competitors, but significant for a new entrant. If we consider such t investment as a cost, the total CPA is around $160 (Exhibit 2). Nevertheless, from a financial perspective we should consider the $60 million initial investment as the only CAPEX required, which need to be remunerated by taking into account the company and market risk. If we assume a 16% rate of return on the CAPEX we would reduce the CPA at 109. 6 (Exhibit 6), close to the condition to make the present plan viable according to Morgan Stanley research. Success implementation of the strategy require Virgin entering and impacting its target customer swiftly, in order to build a critical mass and financial strength before being able to face any price-wars. Breakeven: currently the industry break-even is 17months. If we assume average consumption around 417 minutes per month, we can see that the breakeven will be significantly lower, and around 5 month. In the present calculation we have neither considered any extra revenues generated by VirginXtras, nor a reduction in the churn rate as a likely consequence of the improved customer satisfaction. Redu cing the churn rate is probably one of the most important objectives in the mobile industry sectors, also because gives additional space for price reduction as demonstrated (Exhibit 2, 3, 6). Exhibit 1 [pic] Exhibit 2 [pic] * Assuming 1 Mln of customers. $60 Mln /1 Mln customers = $ 60 per customer Exhibit 3 Intermediate Rebate [pic] Maximum Rebate [pic] * Assuming 1 Mln of customers. $60 Mln /1 Mln customers = $ 60 per customer Exhibit 4 Price Advantage against Market Average Prices [pic] *Mkt Adv = Market price per minute – Virgin price per minute. Exhibit 5 [pic] Exhibit 6 [pic] * Considering the investment on advertisement as a capital expenditure, with a 16% annual rate of return. ($60 Mln /1 Mln customer x 0. 16 = $ 9. 6

The British Obstinacy and Persistence With Their System of Operation Free Essay Example, 1500 words

The divided roles played by solicitors and barristers in the U. K. have put in question the need at all for the division. Until recently, there were 4,800 barristers and 44,000 solicitors in the U. K. There does not appear to be more room for barristers and fresh barristers are finding it difficult getting cases (Cohen, Professor Harry; p10). Solicitors, on the other hand, engage fresh talents and are on the lookout for skills to enhance their marketability. It is possible for solicitors to become barristers and vice versa after going through a short course. However, the flow is greater in the barrister to solicitor transition. The differences are in the solicitor s ability to make contracts with his client for a fee which a barrister cannot do. The solicitor also deals directly with the client which again a barrister cannot do as he has to get the client routed through the solicitor. A solicitor is an officer of the court whereas a barrister is not subject to the control of the co urt although the barrister could be disbarred for any professional misconduct. The similarities are both enjoy legal immunity in respect of actions and statements made during the lawful conduct of their clients lawsuit. We will write a custom essay sample on The British Obstinacy and Persistence With Their System of Operation or any topic specifically for you Only $17.96 $11.86/page There is a powerful plea for fusion by the Law Society because solicitors rightly feel that they are capable of doing what the barristers are doing more efficiently. The Law Society s pleas are not falling on deaf ears because it is through their efforts that the lines of differences between solicitors and barristers are beginning to blur (Types of Legal Career, 2010).