Wednesday, November 28, 2012

[yellow tail]: Is it blue?

The Harvard Business Review article “Blue Ocean Strategy” discusses two different “oceans” that represent two different kinds of industry spaces: red oceans and blue oceans. Red oceans refer to those industries that are already in existence today, whereas blue oceans refer to those industries that are not in existence or are unknown. In blue oceans, demand is created instead of being fought over, which is the case in red oceans. It’s important to note that technology innovation is not the only factor leading to a blue ocean strategy. The ultimate goal of such a strategy is to “align the whole system of the company’s activities in pursuit of differentiation and low cost.”

Casella Wines, the producers and distributors of the famous Australian wine [yellow tail], found a new market in the United States wine industry to sell their product. Within two years, [yellow tail] became the fastest growing brand as well as the number one imported wine into the USA with sales from over 25 million cases of wine passing over French and Italian wine. How did they manage to accomplish such success over such a short period of time? Having read on blue ocean strategy we can clearly see they succeeded in attempting to find a balance in product differentiation and low cost in a new market adding significant value to today’s modern day low-cost wines.

By avoiding the overcrowded market of classy, high-end wine, Casella Wines decided to differentiate and create a fun and social drink that everyone would want to drink and could drink easily, bringing it to the level of traditional social beer drinking and so on. Through decreasing the complexity of wine and making customers less stressed out about the scores of new products, areas, and labels, Casella Wines brought a new level of sophistication through their value proposition of simplicity.

Taking four points into consideration as seen in the above figure, the [yellow tail] brand become famous for its fun and adventurous wine that anyone could drink. First, wine complexity, wine range and vineyard prestige were all factors that were reduced. Second, easy drinking, easy selection, and the idea of fun and adventure in drinking of wine were concepts that were created, which weren’t previously in the existing wine industry. Third, price and involvement of retail stores were factors that had to be raised above current industry standards. And lastly, [yellow tail] eliminated factors that were taken for granted in the current market thus creating a market of their own. Those factors included distinctions and entomological terminology, high-end marketing, and aging factors. Through these tactics, [yellow tail] not only stole customers from competition but also expanded the size of the pie of the market, introducing new customers who would otherwise not have ventured into the almost-elite market of wine. 

In what other ways do you see [yellow tail] engaging in a blue ocean strategy that contributed to its success in the marketplace today?

"Blue Ocean Strategy." Harvard Business Review. October 2004.

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