Applying The Four Actions Framework
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Published: Thu, 04 May 2017
As the world enters globalization, it is important that businesses embrace innovations in their marketing strategies in order to keep up with current marketing trends. As what expert strategists say, there is no such thing as a perfect company but a company may aim for perfection when they learn to identify the less-smart things they do and transform them into doing more smart-things. The Blue Ocean Strategy (BOS) was created in order to challenge industries to go out of their comfort zones and start creating uncontested market spaces that makes the competition irrelevant. This Blue Ocean strategy is in contrast of the Red Ocean Strategy as proposed by Kim and Mauborgne (2005) wherein in industries that exist in the Red Oceans exists in a known marketplace and those in the Blue Ocean exist elsewhere wherein market boundaries are not clearly identified making competition neither here nor there given that the no one knows the rule of the game. BOS focuses on four distinct actions that aims to reduce costs and creates a leap in value through the process of eliminate-reduce-reuse-create. According to Kim and Mauborgne (2005), the most critical among these actions are to eliminate and reduce since these will help companies decrease their costs in actualizing a strategic transformation. The goal of this paper is to make an application of the Blue Ocean Strategy (BOS) to an Australian company, MiniMovers.
MiniMovers is an office and home distance furniture removalist that has existed for 26 years. Its founder, Mike O’Hagan puts up the company with just a $200 investment in which he managed to turn into a fast growing company achieving a turnover which exceeded $23 million. Its humble beginnings started out when local customers have been let down by all of the expensive removalists around the area. Being aware of this problem, Mike offered to help these customers out. He was also aware that moving took really long hours and believed that charging customers with a fixed price was not reasonable so he sought out a different strategy and transformed MiniMovers as the only industry in Australia that offered their expertise in an hourly rate. Because of this transformation, Mike’s industry became 80% cheaper that the quotations provided by their competitors. This has lead to the success of MiniMovers and has continued to live on with its concept of “Creating Ecstatically Happy Customers” (MiniMovers Profile 2011).
MiniMovers belong to the removalist industry wherein they provide moving and relocation services which include local to long-distance and may include international transport of used institutional, household, commercial goods and equipment. MiniMovers offer variety of services which actually encompass the typical removalist company. What is unique is that they actually pioneered the short hourly and short-distance moving system and employ the “Perfect Boxes” which guarantees that customer’s goods are well packed and moved without damage.
APPLYINGTHE FOUR ACTIONS FRAMEWORK
Since the introduction of strategic management in the economic field, industries have begun pursuing their competitive advantage in the global market. Lamb (1984) proposed that strategic management was a continuous process that aims to evaluate and control the industries in which that certain company is involved in and assesses its competitors and create business goals and strategies in order to meet with existing competitors. These strategies will then have to be reassessed quarterly as proposed, in order to determine how effective it is or whether or not it has succeeded otherwise these strategies may need replacement in order to keep up with continuous change in technology, competitor strategies, new economic environment as well as the socio-political environment.
From its introduction up to the present time, strategic management has proven to be a key resource which industries and business leaders use to chase competition advantages (Chandler, 1962). In the concept of BOS, strategic management is actually a value innovation rather than just plain innovation. It is a strategy that is implemented with the objective to clinch the entire system of a company’s actions. The concept of value innovation is requiring companies to orient the entire system into attaining an efficient leap in both values for customers and themselves. According to Kim and Mauborgne (2005), strategic management should be implemented with a Reconstructionist view. This means that the strategic aim of a company must be to create new and best-practices rules by breaking the typical and existing value-cost trade off which eventually leads to creating the so called blue ocean.
four actions framework.jpg
Figure 1. The Four Actions Framework (Kim & Mauborgne, 2005)
Figure 1 illustrates the Four Actions Framework of BOS proposed by Kim and Mauborgne (2005). This framework was introduced in order to split the trade-off between low-cost and differentiation to make way for a creation of a new value curve. Companies should be able to answer the four core questions: (1) which factors that are taken for granted should be eliminated? This question challenges the company to consider eliminating the factors that companies belonging to the industry have long competed for. Companies who actually do benchmarking fail to identify what these factors are. (2) Which factors should be reduced below the standards of the business/industry? This challenges companies to determine if whether or not the services or products they offer to their customers have been overdesigned just to be able win the race against their competitors. The tendency of those companies who always focus on how to beat their opponents end up creating overrated services that increases their cost structure without any gain in return. (3) Which industries should be raised for industry standards and (4) which factors should be created wherein the industry has never offered/implemented? Before the Blue Ocean Strategy framework can be applied, many strategists utilize Porter’s (1979) five forces theory as a strategy canvas can only be created once one captures the contemporary state of the play by detailing the factors that players compete on in terms of products, services and even delivery. In other words, before one can identify what BOS strategy well suits a company, one must identify first what Porter (1979) regards as the five competition forces. Once these competing forces are identified, then the Blue Ocean framework will be applied in order to implement a strategy plan which improves the companies’ efficiency.
According to Porter (1979), new competitors that enter the market will greatly fracture the order of the industry since they tend to influence more competition among current players in the market making more intense market shares. The removalist industry is controlled and is not an easy business venture since the industry characteristics such as freight-rates, barriers to entry, and sub-contracting are actually determined by the dynamics of the sector. With respect to competitive rivalry within the industry sector, competition actually has a direct threat to the survival of the enterprise. Many enterprises within the sector have the same interests making the competition intense and high. There is a double characteristic with regard to competition in Australia’s removalist companies. At one point, there is potential for development in the industry as according to Relocate Magazine (2011), despite the tough year of the removals sector during 2009-2010, they are adapting to the business landscape and are on the bust side of a flourishing property market. On the other hand, because of the slowdowns in the property and corporate spending, there may be falling demand in their services leading to falling revenue. Porter (1979) recognizes the bargaining powers of suppliers and refers to supplier power as “suppliers” that have an impact to the competitiveness and profitability of the enterprise in terms of price and value of product/services. In the case of removals companies and that of MiniMover’s in particular, suppliers may be recognized as their workforce [e.g prepackers, unpackers]. One factor affecting MiniMovers is the quality, training and retention of their employees. Another factor is the bargaining power of customers as porter (1979) describes that buyer power has a direct effect on the profitability of the industry by asking high quality on a basis of a depressing price. There are two key factors that have been identified to affect the consumer preference in a removalist industry which are ease of quality and the rating price of the given quality. The ease of quality refers to the indirect feelings that a customer gets during the process of asking for the companies’ services such as the value added service and perhaps the ease to get the service. The rating price of the given quality is referred to as the direct feelings customers get during the service itself such as the quality, cost, switching costs and end result. Lastly, Porter (1979) suggests that enterprises within different industries will compete with each other especially when their products or services substitute. In a removalist industry, it is very difficult to recognize the differences among industries since they offer and present a similar range of service at a strikingly similar price range. Companies can actually be on top of the game when not only their services, but the environment and customer service can cater to the preference of the potential customers. It is therefore assumed that traditional services are factors that affect MiniMover’s competitiveness.
Now that Porter’s (1979) five competition forces have been identified, it is time to conclude what is the “Blue Ocean” strategy that Minimover’s can employ.
Create – Based on the above analysis, what greatly affects removalist industries is the pricing and quality of service that they offer to their customers. Since Minimover’s rely on customer feedback and the concept of “creating ecstatically happy customers” they must create a market research team in order to follow the trends in customer preference and collect information on how to make more systematized and streamlined training system in order to ensure that employee’s grasps customer ideals and maintain the company’s vision.
Eliminate – MiniMover’s should eliminate benchmarking and stick to their quality of service and the potential to raise their prices. Since customers prefer the idea of having a moving service that would best fit their budget and needs it is not necessary for them to increase their prices just to meet up with the prices of their competitors. This does not also mean that they should offer low prices but continue to stick to the usual price range they offer. BOS does not capture the mass target customers through low-cost pricing but rather through strategic-pricing and they key is to not pursue pricing against competitors within an industry but pursue pricing against alternatives (Kim & Mauborgne 2005).
Raise – In connection with eliminating benchmark’s and the idea of increasing prices, they must maintain their price and raise their quality of services. As identified using Porter’s (1979) framework, what drives customer preferences is the ease of quality and the rating price of the given quality. As stated earlier, creating a marketing strategy that would help to identify the trends of customer preference would allow the creation of a training system that would make sure employees understand their customer’s needs. This will raise their quality of services and would raise the feelings of customer’s ease of quality. Aside from raising quality, it would give the chance for companies to look into the differences among customers and maximize market share through existing markets by being able to accommodate the differing needs of these customers.
Reduce – As analyzed, what is actually important in a removalist industry is the quality of their services such as being able to assist moving at the time of the customer’s preference [example when customers want the job done as soon as possible the industry must make it happen] and making sure that the quality of the move is done with ease [this means that there are no property damages or any circumstance that would drive the customers to be unhappy]. The company should reduce emphasis on the identifying the tools or equipments needed for the move but focus on how to actually make the moving experience pleasant. What use are equipments when movers cannot use these equipments right to cater to their customers’ needs.
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