Blue Ocean Strategy Examples & Return On Investment
This blog article takes a look at what kind of ROI some companies have achieved by implementing a blue ocean strategy by W. Chan Kim and Renée Mauborgne. Click the link above or the picture below to read more.
Start From The Start
If you have not read the first article in this series click here to go to the first article titled "Blue Ocean Strategy Summary"
Executive Summary
- four great examples that have used the blue ocean strategy are Cirque du Soleil, Apple, Nintendo and Netflix
- in all four examples there was features customers desperately wanted that was added and other features that were standard in the industry but not important to a large population that were removed
- all four examples displayed show a very positive ROI
Click here to get training on how to create a blue ocean sales & marketing strategy.
Examples Of Blue Ocean Strategy
1. Cirque du Soleil
Company Website:
Company History:
The company was founded in 1984 by Guy Lailberte. Initially in 1980 the group toured performing as "The Wanders" before they incorporated. During those years they experience financial hardship and needed government funding to stay afloat which they received in 1983. In 1984 they changed their performance to one without animals and one that focused on character driven theatrical approach. By using the blue ocean strategy it has become the largest theatrical producer in the world with over $1 Billion in revenue annually as of 2011.
Product Changes
Eliminate: removed animals and star performers,
Reduce: reliance and variety of food and drink concessions
Raise: increased prominence of acrobats, increased focus on visual performance (lights, timing of acts etc), raised the level of comfort, elegance nd sophistication of the venue
Create: added dancing numbers and musical theater, added multiple productions/shows giving people a reason to return
ROI:
Investment = $1.5 million (from the Canadian government to change to a theatrical focused circus)
Profit = $175 million/year (2008 estimate)
ROI = 35000%
ROI Per Year = 21%
2. The Nintendo Wii
Company Website:
Company History:
Nintendo was founded in 1889 and at the time made handmade hanafuda cards. It is now the world's largest video game company by revenue. Nintenedo tried many different businesses before finding success in video games with the launch of the Nintendo Entertainment System in 1983 and revolutionized both the company and the industry. In 2006, Nintendo introduced the Nintendo Wii as well as several advanced, revolutionary features with the Wii system. The most notable of these was the wireless motion-sensitive remote controllers. In addition Nintendo took a Blue Ocean strategy focusing on targeting families (including the elderly) as opposed to the young male hard core gamer that the industry had been focusing on at that time.
Product Changes
Eliminate: Music storage, video storage, DVD, internet connectivity
Reduce: Development costs for video game producers (an average of $8 million vs $20 million), system sophistication, graphics, productions costs, retail price, processing power
Raise: Number of family games, more internally developed games
Create: Games for the elderly, motion controllers
ROI:
Investment = $448 million (estimate based on annual reports with $124 million research & development costs and $394 million marketing costs)
Profit = $1,032 Million (it is estimated Nintendo makes $6-$50 per Wii console sold for our calculation we will us $16 to be conservative, it is estimated there is 100.3 consoles sold as of October 30th, 2013 and that were was 67.4 Million 3 years after launch)
3 Year ROI = 130% or 32%/year (excludes over 250 Million Wii games sold by Nintendo that they have sold since launch)
3 Year ROI Including Game Sales = 800% or 108%/year (assuming a contribution margin 30% and average retail price of $40)
3. Apple
Company Website:
Company History:
The company was founded in 1976 by Steve Jobs and Steve Wozniak. It is the largest company in the world by market capitalization. For almost two decades Apple focused on manufacturing computer software systems until in 2001 it implemented a blue ocean strategy and launched the iPod music player, which revolutionized how people listened to music.
Product Changes (iPod)
Eliminate: Need to carry CDs
Reduce: Size of device
Raise: Song capacity, ease of use to navigate to/through songs, color options, sound quality
Create: Ability to download to the device, fashion image, additional audio products (podcasts & audiobooks), place to legally download music
ROI:
Investment = $3.3 Billion (development costs estimated at $150 Million, see source, and $285 million in advertising per year, see source)
Profit = $52.5 Billion (As of September 2012 Apple had sold $350 Million iPods, assuming an average revenue per unit of $150 per unit)
ROI per year = 28.6% (given launched in 2001 and sales data as of 2012)
4. Netflix
Company Website:
Company History:
The company was founded in 1997 in Silicon Valley by Marc Randolph and Reed Hastings. Initially the company operated a pay per rent movie rental website where they would ship the movie to you and they you would ship it back to them. Netflix then moved to a monthly subscription model where you could request to be shipped a certain number of videos per month for your monthly fee in 1999. Sales began to grow and the company turned its first profit in 2003 with sales of $272 million and a profit of $6.5 million. In 2007 Netflix began streaming video online so that subscribers could watch movies over the internet. By using the blue ocean strategy it has become the movie streaming service in the world with $3.6 billion in revenue and $17 million in profit in 2012.
Product Changes
Eliminate: Commercials, live sports, news programs
Reduce: Price, technical support, installation process complexity
Raise: Parental content filtering, movie selection, the number of types of devices you can watch on
Create: Ability to watch from any location, ability to watch full seasons on demand
ROI:
Investment = $97.4 Million ($2.5 Million (Initial Investment) plus $94.9 Million in stock offerings)
Profit = $112 Million/Year (As of 2013)
ROI Per Year = 114% (Assuming profits stay at the $112 Million per year, most likely they will increase)
Click here to get training on how to create a blue ocean sales & marketing strategy.
Click here to download the Blue Ocean Strategy Summary PDF.
Read The Next Articles In This Series
1. Blue Ocean Strategy Summary - Click Here To Read This Article
2. Blue Ocean Strategy Formulation - The Four Principles Of Strategy Formation - Click Here To Read This Article
3. Blue Ocean Strategy Formulation - The Strategy Canvas - Click Here To Read This Article
4. Blue Ocean Strategy Execution - Click Here To Read This Article
5. Blue Ocean Strategy Examples & ROI - You Are Reading This Article
Sources For This Series
To see the sources for this article series go to the first article in the series titled "Blue Ocean Strategy Summary".
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