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Saturday, April 14, 2012

A PRACTICAL APPROACH TO BLUE OCEAN STRATEGY - PART VI (RECONSTRUCTION OF MARKET BOUNDARIES)

RECONSTRUCTION OF MARKET BOUNDARIES - 6 PATH FRAMEWORK


INTRODUCTION
One of the principles of blue ocean strategy is to reconstruct market boundaries to break from the competition and create blue oceans. In order to achieve this there are six basic approaches called the SIX PATHS FRAMEWORK. These paths have general applicability across industry sectors and lead companies into the blue ocean. 

6 PATH FRAMEWORK




DESCRIPTION OF COMPONENTS OF THE 6 PATH FRAMEWORK


The objective of the six path framework is to create a new market space i.e. a blue ocean and break out of the bloody red ocean.


APPLICATION OF THE SIX PATHS FRAMEWORK TO POLO RALPH LAUREN T- SHIRTS

PATH 1 – LOOKING ACROSS TO ALTERNATIVE INDUSTRIES

As described in table above alternative industries are industries that have different functions and forms but serve the same purpose e.g. restaurants and cinemas. Restaurants have very few physical features in common with cinemas and serve different functions but they both serve the same purpose which is providing an enjoyable night out.

Alternative industries can be differentiated from substitutes which have different forms but the same function e.g. buses and cars. Buses and cars differ in form but serve the same function which is transporting people from one place to another.

With the above in mind we can appreciate the fact that it is almost impossible to find an alternative industry for Polo Ralph Lauren T shirts which belong to the clothing industry as the sole purpose of the clothing industry is to cover the body.  It is inconceivable to cover the body with anything of different form and function.

In this regard path 1 of the six paths framework does not apply to Polo Ralph Lauren T shirts.


PATH 2 – LOOKING ACROSS STRATEGIC GROUPS WITHIN THE INDUSTRY

As described in earlier strategic groups refer to companies within an industry that pursue a similar strategy and can generally be ranked in a rough hierarchical order built on two dimensions of PRICE AND PERFORMANCE.

In relation to Polo Ralph Lauren T Shirts these strategic groups have already been highlighted in previous articles by dividing the industry into the high class to which Polo Ralph Lauren T Shirts belong and budget class based on price and performance. They are:


  • High class – Polo Ralph Lauren, Tommy Hilfiger, Nautica, Hush Puppies.
  • Budget class – BYC, Gap
With this in mind the table below identifies the reasons why people trade up or down



PATH 3 – LOOKING ACROSS CHAIN OF BUYER


Chain of Buyers refers to the different players involved directly or indirectly in the buying decision. In most industries the competitors converge on a uniform target buyer. In reality there is a chain of buyers. The essence of looking across the chain of buyers is to identify them and focus our efforts on a different group of buyers. The buyer chain involves the:
Purchase – Those who pay for the product or service and may differ from the actual user
User – The actual user of the product or service who may also be the purchaser
Influencer - Those that influence the buying decisions but do not actually purchase the products themselves.

PATH 4 – LOOKING ACROSS COMPLEMENTARY PRODUCT AND SERVICE OFFERINGS
Few services or products can be efficiently provided in isolation and in most cases need other products and services to increase their value
Looking across complementary products and service offering involves accessing buyer pain points before they use the product or service, when the product or service is being used and after the product/service has been used.

PATH 5 - LOOKING ACROSS FUNCTIONAL / EMOTIONAL APPEAL TO BUYERS
Most product or services in the market usually appeal to the consumer either on a functional level or an emotional level.
Looking across functional/emotional appeal involves looking into ways to convert originally functionally oriented products to provide an emotional appeal and vice versa
An example is VIP tickets to cinemas. They appeal to the emotions as no matter where you sit in a cinema everyone watches the same movie but it gives a feeling of prestige.

Polo Ralph Lauren T Shirts appeal emotionally to buyers. Here we focus on converting the appeal to a more functional one.

PATH 6 – LOOKING ACROSS TIME
All industries are subject to external trends that affect their business over time. Looking across time refers to looking into the future and discovering how this trend would affect business and make plans to maximize these trends to create a blue ocean.





































INTEGRATION OF NONCUSTOMERS AND SIX PATHS



The table below shows the integration of noncustomers and the six paths in the six paths framework. It also shows eight distinct segments of noncustomers under the three tiers of noncustomers and which paths can be applied to them.

The results of the table show that the six paths are most applicable to the three noncustomer segments under the first tier of noncustomers 70%  of the paths being applicable to 37% (1st Tier Noncustomers) of the noncustomer segment.