Blue Ocean StrategyPath 1: Look Across Alternative Industries to create uncontested market space

What is Path 1?

A company has to realize that its customers are not only taking their product or service into consideration but also offers from other industries as alternatives to fulfills their needs.

A company competes not only with the other firms in its own industry but also with companies in those other industries that produce alternative products or services

What Are Substitutes?A company competes with other firms in its own

industry

These goods or services have different forms

But: they may have the same function or core utility

Shift in price, change in model, ad campaign – all this can elicit a tremendous response from rivals within an industry

Alternative industries usually don’t recognize these changes

What Are Alternatives?A company competes with firms in other industries

who produce alternative products or services

These goods or services have different forms and function and core utility

But: they have the same purpose

Example:Restaurant vs. Cinema function: enjoy the night out

NetJets – how it works

Fractional jet ownership

1/16 ownership to be shared with 15 others

Each one has 50 hours of flight time per year

Starting at $375,000 (plus pilot, maintenance, and other monthly costs)

NetJets - Facts

Purchased by Berkshire Hathaway in 1998

In less than 20 years now larger than many airlines

> 500 aircraft

250,000 flights to more than 140 countries

Revenue growth at 30-35 % p.a.

Looking across alternative industries

Target group: Business travellersTwo choices:

1.) Business class/first class on a commercial airline

2.) Company’s own private jet

1.) Why do corporations choose to use commercial airlines for their corporate travel?

avoids high investment costs of a multimillion $ aircraft

company purchases only the number of corporate airline tickets needed per year

lowering variable costs

reducing possibility of unused travel time

long check-in and security lines

hectic flight transfers

overnight stays

congested airports

NetJet‘s solution

NetJets avoids the enormous fixed costsin contrary to commercial flights no need to

cover high fixed costs by filling huge aircrafts

Jet is available with only 4 hours’ notice if nothing is available NetJet will charter one

NetJet reduces security issues

2.) Why do people choose corporate jets over commercial travel?

dramatically cuts total time

Reduces hassle

allows point-to-point travel

benefit of having more productive and energized executives

multimillion-dollar price

dedicated flight department is needed to take care of scheduling

deadhead costs (costs of flying the aircraft from its home base to where needed)

NetJet‘s solutionNetJet’s smaller airplanes, the use of smaller

regional airports and limited staff keep costs at a minimum

5,500 airports across the USA in convenient locations near business centres

On international flights the plane pulls directly to the customs office

In-flight-convenience: favourite beverages, food, ... ready

NetJet - Attributes

Flexibility

Shortened travel time

Hassle-free travel experience

Increase reliability

Strategic pricing

Nintendo Wii – What it is

Home video game console

Wireles controller Handheld pointing deviceCan detect movements in 3 dimensions

Connections to the internet for updates

Nintendo Wii - Facts

2001: Was conceived after „flop“ of Nintendo Game Cube

2005: Prototype of the controller was revealed at Tokyo Games Show

2008: Wii leads the generation over the playstation 3 and xBox 360 in worldwide salesMarket leader

Looking across alternative industries

Target group: Broader demographic than Sony and Microsoft Two choices:

1.) Going out for bowling Families, older people

2.) Staying at home and play a console gameKids and teenagers

Nintendo Wii – Key factors

Movie playingPrice (~GraficsPhysicsFunGame LibraryMagic wand

Nintendo Wii - Solution

Nearly every demographic group as target market

Satoru Iwata (Nintendo president)

„We‘re not thinking about fighting Sony, but about how many people we can get to play games. The thing we are thinking about most, is not portable systems, consoles and so forth, but that we want to get new people playing games“

ConclusionIndividual consumers and buyers ponder intuitively

Seller shouldn’t abandon this thinking