MRKT 5500 Final Exam.docx - 1 Identify and describe 3 defining characteristics of a ‘blue ocean’ strategy What is the relationship between the value

MRKT 5500 Final Exam.docx - 1 Identify and describe 3...

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1. Identify and describe 3 defining characteristics of a ‘blue ocean’ strategy. What is the relationship between the value provided by the firm and the cost savings? How does a blue company achieve value creation and cost savings while ‘red ocean’ companies seem to incur greater costs with greater value creation? A good blue ocean strategy will have three defining characteristics: o The blue ocean strategy will be tightly focused – and everyone will understand on what factors the company is competing. This helps avoid the temptation to invest in things which are unrelated to those key competitive factors. o The blue ocean strategy will separate from that used by other industry players – because you’re looking across alternatives rather than solely attempting to be better than the established players. Therefore, their market is no competitor can threaten them. o The blue ocean strategy will be clear-cut and easy to communicate – Company’s product is unique. A company using a new strategy or technology to create emerging Markets. Value creation occurs whenever companies support innovation with usefulness, price and cost benefits for customers. In the blue ocean there is no limitation. However, because they don't have competitors. Therefore, they don’t need to limit their cost. They still can create a high profit. Red Ocean Strategies: A company must master its traditional markets using conventional strategic planning tools. In the red ocean, the only way for the companies to gain profit is to lower the cost instead of raising the market price. The companies cannot raise the market price because they are facing a limited range of customers. If a company raises the market price, the customer will look for other companies which are cheaper than this company. Also, when a company lowers the cost they may lower the compensation of the employees that may cause the company loses their employees as well. 2. Discuss the highlights of the Starbucks case. When Howard Schultz launched the Starbucks brand, who was the target market, how was Starbucks positioned and what decisions about price, product, distribution and promotion supported this positioning? -Starbucks wanted to position themselves as a premium product in the coffee industry by creating a high standard, introducing innovating products and providing excellent customer service. Schultz wanted to position Starbucks as a luxury brand so they targeted office workers, well-educated customers and white-collar workers with middle to high incomes, who had a desire to purchase premium products. Schultz wanted Starbucks to become a place where people could go and interact with one another and relax. He wanted Starbucks to become the “Third Place,” the place between home and work and where people could gather.
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