BLUE

OCEAN
STRATEGY YELLOW TAIL
WINES

Contents
1. Executive Summary
2. Introduction: What is Blue Ocean Strategy
3. Nature of the Problem and previous works done by the people.
4. Six Principle of the Blue Ocean Strategy
5. Definition of and differences between Red and Blue Ocean Marketing
6. Blue Ocean Strategy Tools
7. Formation of the market
8. Yellow Tail Wines A Successful execution
9. 4 hurdles to execution
10. Conclusion
11. Bibliography

Executive Summary

Before discussing Blue Ocean Strategy in detail an overview can be set up. Blue Ocean Strategy
is a fast developing strategy in the corporate world and more and more Organizations are
increasingly adopting the Blue Ocean Strategy. Blue Ocean Strategy possesses incredible
potential which promises to help the organizations achieve their prime objectives.
It can be summarized that the 2 logics namely the conventional logic and the Blue Ocean
Strategy logic are very distinct.
Conventional logic believes that when functioning in an industry, the conditions are rigid and
already given. However, Blue Ocean believes that the industry conditions can be shaped and
modified.
Conventional logic supports the building of competitive advantages to beat the competition but
the Blue Ocean logic claims that a quantum leap in the buyer value must be created to dominate
the market.
The Conventional logic says that - Retain and expand the customer base through further
segmentation and customization. Think in terms of embracing customer differences.
The Blue Ocean logic for the same says - Go for the mass of buyers and willingly let some

existing customers go. Think in terms of embracing key customer value commonalities.
Not one but many examples can be listed where Blue Ocean Strategy has successfully turned the
things around for an organization and they have continued to use it.

Introduction: What is Blue Ocean Strategy?

Blue ocean strategy generally refers to the creation by a company of a new, uncontested market
space that makes competitors irrelevant and that creates new consumer value often while
decreasing costs. It was introduced by W. Chan Kim and Rene Mauborgne in their best-selling
book of the same name.
Blue Ocean Strategy is a business strategy book first published in 2005 and written by W. Chan
Kim and Rene Mauborgne of The Blue Ocean Strategy Institute at INSEAD. The book
illustrates what the authors believe is the best organizational strategy to generate growth and
profits. Blue Ocean Strategy suggests that an organization should create new demand in an
uncontested market space, or a "Blue Ocean", rather than compete head-to-head with other
suppliers in an existing industry.
It is based on a study of 150 strategic moves spanning more than 100 years and 30 countries.
Blue Ocean Strategy is the simultaneous pursuit of differentiation and low cost.
The following guidelines may be proposed to companies seeking to create blue oceans:

1. Identify the key features/ dimensions that currently define a product/ service.
2. Identify a group of customers who only value a subset of these features. These customers may
be currently using lower end alternatives, or may be very different from the current customers
while having needs that are similar at some fundamental level.
3. Make the product or service not as good on the dimensions less valued by new target
customers. This step is counter-intuitive but necessary in order to create value while decreasing
cost.
4. Consider making the new product or service better on the dimensions valued by the new target
customers and/ or introducing new features targeted to these new customers.

It must be noted that the aim of Blue Ocean Strategy is not to out-perform the competition in the
existing industry but to create new market space or a blue ocean, thereby making the competition
irrelevant.
Blue Ocean Strategy offers systematic and reproducible methodologies and processes in pursuit
of innovation by both new and existing firms.

Blue Ocean Strategy frameworks and tools are designed to be visual in order to not only
effectively build the collective wisdom of the company but also to effectively execute through
easy communication.
Nature

of the Problem

Before the concept of Blue Ocean Strategy, a very dynamic aspect was missing when it came to
competition. The Market leaders were simply leading and the competition offered to them was of
a very weak magnitude. It was fast realized by the theorists that a new strategy needed to come
up, a new mechanism which had to potential to offer a way up for the weak firms, for the firms
who were unable in many ways to even compete with the Market holders.
The weak firms were unable to challenge the big firms because the only way of competition was
the traditional way and in the traditional way there was no chance for the weak firms to overtake
or even compete with the big firms. Blue Ocean Strategy was a kind of spin off from the
traditional strategies and ways of thinking.
After an extensive research on the same, I found out that there were a huge scope of
improvement and Blue Ocean Strategy provided me with great solutions of the same.
Unlike the traditional approach, Blue Ocean Strategy attempts to create an uncontested market
space, a market space which previously was dormant and the Market leaders have been
unsuccessful in spotting it.
Previously the firms were absolutely unable to compete with the big firms but now with the
arrival of Blue Ocean Strategy the definition of competition have become much wider and the
dimensions were no longer confined.

Previous Works on the same

Blue Ocean Strategy is one of the most recent developments in the business scenario and hence
there have been a huge number of distinguished authors working on the same. Some majorly
known people in the current case are:
Professor Chan Kim and Professor Rene Mauborgne who together came up with the book Blue
Ocean Strategy, one of the most popular books when it comes to this topic.
In many ways they are considered as the founders of this very promising marketing strategy and
the credit directed towards them isnt at all biased in any way.
After an extensive survey of the same, I found gaps and also a scope to bridge the gaps.

Objectives of the Study

Blue Ocean Strategy is one of the most recent and successful phenomenon budding swiftly in the
Marketing World.
The Objective of this project is to understand the real meaning behind the Blue Ocean and how it
is different from the Red ocean. The project also describes about the major steps taken to
implement this strategy.
Blue Ocean Strategy describe rather than competing within the confines of existing industry or
trying to steal customers from rivals (Red Ocean strategy), uncontested market space should be
developed that makes competition irrelevant. Thus project also gives us an idea about creating
new market space. Red oceans are all the industries in existence todaythe known market space.
In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the
game are known. Here companies try to outperform their rivals to grab a greater share of existing
demand. As the market space gets crowded, prospects for profits and growth are reduced.
Products become commodities, and cutthroat competition turns the red ocean bloody.
Blue oceans, in contrast, denote all the industries not in existence todaythe unknown market
space, untainted by competition. In blue oceans, demand is created rather than fought over. There
is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is
irrelevant because the rules of the game are waiting to be set.

Blue Ocean is an analogy to describe the wider, deeper potential of market space that is not yet
explored. Like the blue ocean, it is vast, deep, powerful, in terms of profitable growth, and
infinite

Six Principles of Blue Ocean Strategy

There are basically 2 wide heads under which the 6 prime principles of Blue Ocean Strategy are
grouped.
Formulating Principles:
1. Reach beyond existing demand
2. Reconstruct Market boundaries
3. Focus on the big picture, not the numbers
4. Get the strategic sequence right.

Execution Principles:
5. Overcome key Organizational hurdles
6. Build execution into strategy.

Defining RED and BLUE Ocean Strategies

Red and Blue Ocean Strategy have some notable differences which are presented above.
RED

BLUE

Compete in existing market space

Create uncontested market space

Beat the Competition

Make the competition irrelevant

Exploit existing demand

Create and capture new demand

Make the value cost trade off

Break the value cost trade-off

Align Strategy choice of differentiation or low cost

Simultaneous pursuit of diff. and low cost

Blue Ocean Strategy Tools

Value

Innovation The cornerstone of BOS

Value innovation, the cornerstone of blue ocean strategy, is the simultaneous pursuit of
differentiation and low cost, creating a leap in value for both buyers and the company. Because
value to buyers comes from the offerings utility minus its price, and because value to the
company is generated from the offerings price minus its cost, value innovation is achieved only
when the whole system of utility, price, and cost is aligned.
Break the value-cost tradeoff by answering the following questions:
What factors can be eliminated that the industry has taken for granted?
What factors can be reduced well below the industrys standard?
What factors can be raised well above the industrys standard?
What factors can be created that the industry has never offered?

Strategy Canvas

The strategy canvas is the central diagnostic and action framework for building a compelling
blue ocean strategy. The horizontal axis captures the range of factors that the industry competes
on and invests in, while the vertical axis captures the offering level that buyers receive across all
of these key competing factors.
The strategy canvas serves two purposes:
To capture the current state of play in the known market space, which allows users to clearly
see the factors that the industry competes on and where the competition currently invests and
To propel users to action by reorienting focus from competitors to alternatives and from
customers to noncustomers of the industry
The value curve is the basic component of the strategy canvas. It is a graphic depiction of a
companys relative performance across its industrys factors of competition. A strong value
curve has focus, divergence as well as a compelling tagline.

E-R-R-C (Eliminate, Raise, Reduce, Create) Grid

The Eliminate-Reduce-Raise-Create (ERRC) Grid compliments the Four Actions Framework. It

pushes companies not only to ask the questions posed in the Four Actions framework but also to
act on all four to create a new value curve, which is essential to unlocking a new blue ocean. By
driving companies to fill in the grid with the actions of eliminating and reducing as well as
raising and creating, the grid gives companies four immediate benefits:
It pushes them to simultaneously pursue differentiation and low cost to break the value-cost
trade off.
It immediately flags companies that are focused only on raising and creating, thereby lifting the
cost structure and often over engineering products and services a common plight for many
companies.
It is easily understood by managers at any level, creating a high degree of engagement in its
application.
Because completing the grid is a challenging task, it drives companies to thoroughly scrutinize
every factor the industry competes on, helping them discover the range of implicit assumptions
they make unconsciously in competing.

Four

Actions Framework

The Four Actions Framework is used to reconstruct buyer value elements in crafting a new value
curve. To break the trade-off between differentiation and low cost and to create a new value
curve, the framework poses four key questions, shown in the diagram; to challenge an industrys
strategic.
The four actions namely are: Eliminate Raise, Reduce and Create. The E-R-R-C Grid is formed
by identifying each of the elements of this four actions framework.

Formulating Blue Ocean Strategy

Reconstruction of Market

Reconstruction of market can be done in 6 ways:

Reconstruction can be done across Alternate Industry
Reconstruction can be done across Strategic groups
Reconstruction can be done across buyer groups
Reconstruction can be done across complementary Scope of products and Services
Reconstruction can be done across functional emotional orientation
Reconstruction can be done across time.

Yellow Tail Wines: A Successful execution

There are various examples of successful execution of the Blue Ocean Strategy. Firms like,
Nintendo, Apple, NetJets, Air Asia, Curves, OldTown, Tune Hotels, Novo nordisk etc have
successfully implemented this Strategy.
I will be discussing the implementation of one such firm as well, that firm goes by the name
Yellow Tail Wines.
Yellow Tail (officially typeset [ yellow tail ]) is a brand of wine produced by Casella Wines Pty
Ltd. Casella wines is based in Yenda, Australia, which has a population of approximately 1400
people. The Casella family has produced wines since the 1820s in Italy. However in 1957 the
Casella family, headed by Filippo Casella and his wife Maria, moved to Australia for a better
life. YellowTail is a new wine brand and was a chance for the family winery to enter into the
bottled wine markethaving previously supplied bulk wine to other wineries. YellowTail was
developed around the year 2000, originally marketed to export countries and became the number
one imported wine to the USA by 2003. In that time the family-owned winery expanded 10 times
its original size. The winery has the capacity to have approximately 300 million litres on site
with more wine produced and stored elsewhere.
Yellow Tail faced rigorous competition in the United States Market since the United States Wine
industry is a highly competitive industry. There was an abundance of Wine making companies in
the United States market. Some facts about the American Wine Industry are as follows:
American wine industry is the 3rd largest wine industry in the World estimating around $20
billion.
The state of California alone makes 66% share the rest is from Italy, France, Spain, Chile,
Argentina and Australia.
The industry has been every exploding with new vineyards regularly coming up in Oregon,
Washington and New York.
The customer base is basically stagnant.
United States of America stands 31st in per capita consumption when it comes to Wine
consumption.

Top 8 producers in the American Wine industry had 75% of the market; 1600 had the remaining
25%
Millions of Dollars are spent for marketing in the American Wine Industry. There are Titanic
battles fought due to intense competition.
There has been a severe price pressure in the American Wine Industry
The dominant growth strategy was towards premium wines more complexity, better image,
more prestigious vineyards, and number of medals won at wine festivals.
The American Industry offered both premium and budget wines to their customers.
Premium Wines:

Premium and Budget wines:

Yellow Tail then decided to try and implement the Blue Ocean Strategy and hoped that it was the
best solution to their problem.
Yellow Tail implemented ideas that were absolutely contrasting to the traditional wines.
The features of traditional wine being offered then were:
An elite refined image in packaging with heavy use of wine terminology
Aging quality
Prestige of a vineyard and its legacy
Complexity and sophistication of a wines taste such as tannins or oak
A diverse range of wines to cover all varieties of grapes & consumer preferences

The features Yellow Tail wine offered to counter the Traditional wines are as follows:
Yellow Tail wines offered wine bottles with no Jargon; they had an immensely simple and
nontraditional label. They also offered simple and vibrant packing
Yellow Tail wines claimed that Aging of the wine was not important, which was a clear counter
to the traditional wine makers claims.
Yellow Tail claimed their wines to be fruity, soft on palate and kind of sweetish. They claimed
that this wine was absolutely perfect for the people who had not consumed wine before.
Yellow Tail offered only 2 types of wines initially, one being the Red named Shiraz and the
second one being White named Chardonnay. They also used same bottles for the packing of both
the wines which contributed in lowering their logistics cost considerably
Yellow Tail wines adopted a different way of selling their wines. They claimed to be selling
The essence of a Great land.Australia hence; they were NOT just selling wine.
Yellow Tail wines used lower case alphabets on their labels and used a Kangaroos logo which
made their product seem really vibrant and fun.
Yellow tail wines enthusiastically promoted the wine they could understand

Basically Yellow Tail wines pursued their customers with a very different approach, an approach
which was traditionally conflicting especially when it came to a product like wine. As a result of
this approachs success Yellow Tail wines successfully appealed to a much wider population and
not just the wine drinkers.
Now, let us identify the approach of Yellow Tail wines in a very detailed manner.
Yellow Tail is the fastest-growing foreign wine label in U.S. history. In less than three years, it
became the No. 1 imported wine in the U.S., selling more than 11.2 million cases in 2004.
Casella Wines began its meteoric rise by taking a different perspective on the wine market. It
looked across the alternatives to wine: Beer, spirits and ready-to-drink cocktails, which capture
more than three times as much in consumer sales as wine. Casella also discovered that most
Americans actually found wine a turnoff. Wine was intimidating and pretentious, a highly
acquired taste. While the wine industry long competed on how to make a sophisticated wine for
special occasions, Casella redefined the market and made wine an everyday enjoyable
experience.

Gone were the intimidating labels, the discussions on tannins and oak. Endless choice was
clipped to two varieties, one red and one white. The labels were simple and colorful, the taste
sweet and fruity. With no promotional campaign, Yellow Tail rendered its competition
irrelevant. It didnt simply steal market share; it grew the market, bringing in 6 million new wine
drinkers. Novice wine drinkers began to drink more wine, jug-wine drinkers moved up market
and expensive-wine drinkers moved down to Yellow Tail.

Let us now discuss Yellow Tail wines case in detail, point wise:
STRATEGY CANVAS
The Strategy canvas (which has been discussed in detail as one of the critical Blue Ocean
Strategy tool) of United States of Americas Wine Industry in the late 1990s looked somewhat
like this

The Premium Wines cost around $15-$20 a bottle and the Budget wines were priced at $5-$7 per
bottle at that period of time.
The Strategy Canvas graph is self explanatory of what the United States of Americas Wine
Industry looked like in the 1990s.

In the above graph,

The white Triangle path denotes the EXPENSIVE WINES
The Green Rhombus denotes the CHEAP WINES and,
The Yellow Oval denotes the YELLOW TAIL WINES.
From the figure it can be clearly noted that how Yellow Tail wines went about in the United
States Market, they had set their prices low, lower than Expensive wines and a slightly more than
the Cheap wines. The Use of technology in manufacturing the wines in case of Yellow Tail was
very low, so was above the line marketing and aging quality. The Vineyard prestige was low and
the complexity of the wines was lower than the Expensive and Cheap wines too. Yellow Tail
wines offered mainly 2 ranges of wines and so the wine range was relatively small as well. The
ease of drinkability, ease of selection and the amount of fun and adventure witnessed while
consumption of Yellow Tail wines were seen to be very high, which was just a little lower than
the premium expensive wines.

E-R-R-C

(Eliminate, Reduce, Raise and Create) Grid in Case of Yellow

Tail Wines
After witnessing the above graph of comparison between Yellow Tail Wines, Expensive Wines
and Cheap Wines it can be easily ascertained that Yellow Tail wines had taken up a very
different course of action. This different course directly contributed in ascertaining the E-R-R-C
Grid of Yellow Tail wines. What Yellow Tail wines had Eliminated, Reduced, Raised and
Created is given in the same order as follows:
Eliminate
Yellow tail wines had successfully eliminated the enological terminology and distinctions in the
wines.
Yellow Tail wines had also successfully eliminated the Aging qualities.
Yellow Tail wines had considerably reduced or in other words eliminated Above-the-line
Marketing.

Reduce
Yellow Tail wines had successfully reduced the wine complexity in their products (wines)
Yellow Tail wines had reduced the wine range which made it easier for the American public to
choose from. The element of confusion had reduced considerably due to this measure by the
Yellow Tail wines.
Yellow Tail wines had also reduced their Vineyard Prestige.

Raise
Yellow Tail wines had raised/increased their price versus the Budget wines, that gave them an
upper hand.
Yellow Tail wines had considerably increased/raised the retail store involvement.

Create
Yellow Tail wines had created easy drinking which was a new thing when it came to wines.
Yellow Tail wines had also created the ease of selection, it was now very easy for the people to
select from the wines since the wine range by Yellow Tail wines was not at all large.
Yellow Tail wines was also successful in creating the Fun and Adventure when it came to
wines, that was a new aspect which was explored first by Yellow Tail.

Results of the adoption of the Blue Ocean

Strategy on Yellow Tail Wines

Yellow Tail wines successfully implemented the Blue Ocean Strategy in the United States Wine
Market and as a result it witnessed a number of positives which are listed below:
Yellow Tail wines went onto become the number 1 imported wines in the United States by
outselling France and Italy
Yellow Tail wines became the fastest growing imported wine in the history of the United States
of Americas Industry which also created new consumers of wine, jug drinkers trade up and
premium wine drinkers trade down
However, the wine industry criticized them heavily at first but now Yellow Tail wines are
excelling and shining brighter than most. Yellow Tail wines have now won a number of awards
and prizes for the excellence in the Wine Industry.
Definitely, the implication in this case is not that the Blue Ocean Strategy itself was the only
factor behind the success of Yellow Tail Wines, but that this particular Strategy (Blue Ocean
Strategy) played a remarkable role in Yellow Tail Wines success and that is known for a fact by
the most.
Now Yellow Tail Wines enjoy remarkable success and they themselves credit their policy for it,
that particular policy was a built having Blue Ocean Strategy policies as their base.

Four Hurdles to Execution of Blue

Ocean Strategy

Once a company has developed a blue ocean strategy with a profitable business model, it must
execute it. The challenge of execution exists, of course, for any strategy. Companies, like
individuals, often have a tough time translating thought into action whether in red or blue
oceans.Knowing how to triumph over challenges is key to attenuating organizational risk. To
varying degrees, companies may face all or a subset of the following four hurdles:
The Cognitive Hurdle: Red oceans may not be the paths to future profitable growth, but
they may have served the organization historically and employees have grown comfortable with
them, so why rock the boat? People must be woken up to the imperative for strategic shift.
The Resource Hurdle: It is assumed that the greater the shift in strategy, the greater the
resources it requires for execution. But many companies find resources in notoriously short
supply.
The Motivational Hurdle: How do you motivate key players to move fast and tenaciously to
carry out a break from the status quo?
The Political Hurdle: As one manager put it, In our organization you get shot down before
you stand up.To overcome these hurdles, companies must abandon perceived wisdom on
effecting change. Conventional wisdom asserts that the greater the change, the greater the
resources and time you will need to bring about results. Instead, you need to flip conventional
wisdom on its head using what we call tipping point leadership.

Conclusion

After taking everything into consideration about Blue Ocean Strategy it can be summarized that
the 2 logics namely the conventional logic and the Blue Ocean Strategy logic are very distinct.
Conventional logic believes that when functioning in an industry, the conditions are rigid and
already given. However, Blue Ocean believes that the industry conditions can be shaped and
modified. Similarly, Conventional logic supports the building of competitive advantages to beat
the competition but the Blue Ocean logic claims that a quantum leap in the buyer value must be
created to dominate the market.
The Conventional logic says that - Retain and expand the customer base through further
segmentation and customization. Think in terms of embracing customer differences.
The Blue Ocean logic for the same says - Go for the mass of buyers and willingly let some
existing customers go. Think in terms of embracing key customer value commonalities.
Blue Ocean Strategy creates a whole new aspect; a whole new side to marketing, its creativity
cannot be ignored. Other than Yellow Tail wines a number of other firms have adopted the same
strategy and their approaches are now increasingly being rendered successful. Companies like
Microsoft, Nintendo, Apple, Gillette, etc have turned to this strategy and in every single case
success has come as a reward.
Blue Ocean Strategy is no less than a mini revolution in the world of marketing which compels
the marketer to think in a diverse and a new manner. This diverse thinking/ thinking out of the
box in turn gives birth to the creativity.

Bibliography

Sources of information are listed as below:

Books :- 1. Blue Ocean Strategy by Professor Chan Kim and Professor Rene Maugborne
Articles: - 1. Harvard Business School HOW STRATEGY SHAPES STRUCTURE
Harvard Business Review
September 2009
Summary: This article argues that there are two types of strategy: structuralist strategies that
assume that the operating environment is given, and Reconstructionist strategies that seek to
shape the environment. In choosing which of the two is most appropriate for your organization,
managers must consider environmental attractiveness, the capabilities and resources they can call
on, and whether the organization has a strategic orientation for competing or for innovating.
Whichever type of strategy is chosen, success will depend on creating an aligned set of strategy
propositions targeted at three different sets of stakeholders: buyers, shareholders, and the people
working for or with the organization. Where the approaches diverge is in the nature of their
proper alignment. Structuralist strategies require that the three propositions the value, the
profit, and the people propositions focus on delivering either low cost or differentiation.
Reconstructionist strategy propositions align around delivering both.
2. Wall Street Journal VALUE KNOWLEDGE OR PAY THE PRICE
The Wall Street Journal Europe
January 29, 1998
Summary: When it comes to wealth creation, the value of the traditional factors of production
land, labor, and capital is increasingly taking a back seat to a companys stock of knowledge.
However, unlike the traditional factors of production, knowledge is a resource locked in the
human mind. Creating and sharing knowledge are intangible activities that can neither be
supervised nor forced out of people. They happen only when people cooperate. How can
companies motivate knowledge workers? What will it take to unlock the ideas and cooperation
of individuals on whom our organizations depend?

Linkshttp://www.yellowtailwine.com/media/109729/100910%20asian%20correspondent,%20blue%
20ocean.pdf, last accessed on 10th August 2013, 09:48 pm
http://www.blueoceanstrategy.com/teaching-materials/yellowtail/, last accessed on 9th August 2013,
08:35pm