Short Case Studies - Industry Analysis & Reviews

Apple's Blue Ocean Strategy: Navigating Innovation with Purpose

2023-09-08T19:24:00.001+05:30

Title: "Apple's Blue Ocean Strategy: Navigating Innovation with Purpose" Introduction: In the realm of business strategy, companies are often advised to fiercely compete in existing markets. However, every now and then, a company emerges that challenges this conventional wisdom by carving out a unique position in an uncontested market space. One such exemplary pioneer is Apple and its brilliant implementation of the Blue Ocean Strategy. In this article, we explore how Apple has set sail towards success with its innovative approach, and how their strategic choices provide invaluable lessons for businesses aiming to make waves in their respective industries.

1. Charting New Waters: Apple's Blue Ocean Strategy is epitomized by its ability to identify unexplored or neglected market spaces and redefine the rules of engagement. From personal computers with revolutionary interfaces to the world's first handheld music player, Apple has introduced disruptive innovations in multiple industries, creating blue oceans where none existed before. By continually seeking market voids and envisioning unconventional solutions, Apple continuously reinvents itself to stay ahead of the curve.

2. Differentiation and Value Innovation: Central to Apple's success lies its emphasis on differentiation and value innovation. Instead of attempting to compete directly with existing products and services, Apple has consistently pursued its own unique vision, resulting in the unrivaled user experience we associate with Apple products today. By challenging industry norms, Apple has elevated user expectations, positioning itself as an aspirational brand that garners customer loyalty beyond just functional attributes.

3. Simplicity is Key: Apple's unwavering commitment to simplicity has been a key ingredient in their Blue Ocean Strategy. Whether it's the iconic design, intuitive user interfaces, or seamless integration of hardware and software, Apple products have simplified complex technologies, making them accessible and appealing to a wider audience. By removing unnecessary complexities, Apple has converted technology from intimidating to accessible, opening new markets and paving the way for revolutionary consumer experiences.

4. Cultivating Ecosystems: Another crucial aspect behind Apple's Blue Ocean Strategy is their ability to create and cultivate interconnected ecosystems. From iTunes to the App Store and iCloud, Apple has seamlessly integrated multiple products and services, making it difficult for users to switch to competitors. By building loyalty through an ecosystem, Apple has not only created additional revenue streams but has also cemented its relevance and dominance in the industry.

5. Continuous Innovation: Apple's Blue Ocean Strategy goes beyond mere product innovation; it is a mindset that drives continuous evolution. Steve Jobs famously said, "Innovation distinguishes between a leader and a follower," and Apple's relentless pursuit of new ideas has been instrumental in keeping competition at bay. By consistently challenging their own products and employing breakthrough innovations, Apple ensures it stays ahead of the curve, consistently redefining the boundaries of what's possible.

Conclusion: Apple's Blue Ocean Strategy exemplifies the art of breaking free from the confines of traditional competition and creating new market spaces. By combining differentiation, value innovation, simplicity, ecosystem cultivation, and a culture of continuous innovation, Apple has transformed various industries, shaping our lives in ways we never thought possible. As businesses navigate the choppy seas of competition, they can take inspiration from Apple's strategic choices and apply them to their own unique circumstances, setting sail towards their own blue oceans and achieving unprecedented

Data Science Online Course Python Programming Data Science Basics

2023-04-26T10:56:00.007+05:30

Data Science Zero to Hero

Pandemic Impact or COVID-19 Impact on Indian Economy

2020-12-25T10:35:00.001+05:30

The COVID-19 pandemic started to rise in India from the month of July post the lockdown lifted the government. Confirmed cases, Recoveries & Deaths also increased monthly. Government despite launching wide promotional campaign about social distance, wearing masks & sanitizer usage, numbers kept growing.

The consumer price inflation fell even before pandemic started and flattened between 5.5% - 5.90% & rose in the month of November to close to 7%. Supply chain disruptions due to lock down restrictions in different states had led to increase in inflation and November inflation is attributed to pent up demand.

GDP Growth% also declined during the pandemic and worsened further in Q3 2021 due to lockdown where factories were shutdown and labour moved to their native places. Trade restrictions on China also created raw material shortages and manufacturing went down.

Government launched Atmanirbhar Bharat campaign and announced PLI Scheme for companies that set up new manufacturing facilities and increase production domestically.

The long term Atmanirbhar strategy will not be significant in the short term. Moving production from China to India is a difficult task and its success relies on many geo political factors.

Economic activity came to a grinding halt in the country. The lockdown had devastating impacts on an already slowing economy and people’s livelihoods as shops, eateries, factories, transport, services and business establishments were shuttered. India’s GDP was on a downward slope much before the COVID-19 pandemic hit the country, largely due to the demonetisation exercise, and the botched-up implementation of the Goods and Services Tax (GST) that paralysed the cash-dominated informal sector and small businesses.

RBI Monetary Policy – COVID-19

The RBI is maintaining the accommodative stance since February 2019 MPC meeting. An accommodative stance means that there is room for lowering of interest rates in the future to revive growth and demand in the economy. The MPC has decided to continue with this stance “at least during the current financial year and into the next financial year – to revive growth on a durable basis and mitigate the impact of COVID19 on the economy while ensuring that inflation remains within the target going forward.” Even as the central government and the central bank have worked for hand in hand to revive the economy and provide financial support, the economy still recovering from the covid-19 impact with rising cases. Therefore RBI decided to remain status quo on the rates and await inflationary pressures to ease before it takes any action to fuel growth. RBI requires more headroom to deal with policy measures.

Government Policy

Most of relief measures are indirect support such as credit guarantees and liquidity infusion that proved to be ineffective in generating higher credit growth. The credit offtake from banks will remain subdued in the near term because of low credit demand. Even if the health crisis is managed by mid-2021, the economic recovery will be slow and uneven with adverse consequences on output, employment and financial stability. The discretionary spending on non-essential goods has declined drastically due to rising unemployment and worries about likely job losses in the future. The pandemic has exposed the vulnerability of India’s public healthcare system. India’s public healthcare system is one of the most underfunded in the world. India’s public expenditure on health is less than 2% of its GDP.

Blue Ocean Strategy - Amazon Prime Delivery, Air & Content

2020-03-05T10:56:00.000+05:30

Amazon Prime, or One Hour Delivery are all examples of Amazon creating uncontested space (ie. Blue Oceans) in which to compete far away from anything their competitors can do. Amazon was able to reduce the delivery time and now you can purchase a product and get it delivered to your house in 2 days with no additional cost. This was achieved by Amazon Prime, which is a premium subscription service, it started in 2005 and charges U$119 of yearly subscription from its members. According to Jeff Bezos, on the yearly investor letter of 2018, they had more than 100 million members. This is almost 12 billion dollars of inflows that Amazon can invest in the supply chain. Amazon rose customer satisfaction to a new standard, pioneered with one-click shopping, customer reviews, and fast receipt verification on email.

Prime Day is about leveraging a flywheel of subscribers and recurring revenue. Prime Day is a designed as a massive sale exercise to attract consumers who aren't Prime subscribers to experience what prime is all about and become members. Amazon primarily looks ate Prime days as a weapon to penetrate the amazon customer households to convert them as prime subscribers. Amazon intends to have more Prime subscribers because they buy more stuff, consume more content, provide more data, and have more lifetime value. Cowen & Co. estimates that Amazon had 63 million Prime subscribers and 44% of them planned to buy something on Prime Day with another 42% undecided. Cowen & Co. estimates that about 10% of non-Prime households will sign up on Prime Day.

Prime Day also advertises the Amazon logistics capabilities of fast and free delivery. Free one-day Prime delivery is now available on more than 10 million products, and many of them will be on sale on Prime Day. Many of the amazon customers jump on to this bandwagon and make that delivery speed an expectation for Black Friday and the holiday season. Amazon's competitive advantage in terms of logistics vs. other retailers is classically evident on prime day delivery. According to estimates from Consumer Intelligence Research, the number of Prime subscribers recently topped 100 million, and on average those customers spend about $1,400 per year, compared with about $600 per year for shoppers who aren’t members.

Through Prime Video Amazon is playing in red ocean media where competitors like Netflix, Apple and other content providers dominate. For example, Prime users can add Showtime or Starz for $8.99 a month. Amazon takes a cut of the revenue, typically about 25 percent for the largest companies, when a customer signs up. Amazon’s strategy is Create the world’s largest online shopping mall and then invite smaller businesses to pay a toll in exchange for using the site to reach many millions of new customers and also provide media content.

Amazon has one other weapon that gives it a distinct advantage over Netflix and its other media peers: the Echo. As more of the Alexa-powered devices populate consumers’ homes, it’s not hard to imagine tighter integrations with smart TVs. That opens Amazon up to all sorts of untapped opportunities with advertising and cross-selling products.

Blue Ocean Strategy – Amazon blue oceans - Drone Delivery Prime Air

2020-03-05T10:43:00.002+05:30

Blue Ocean strategy delivers unique products or assortment of services which a customer cannot acquire anywhere else that may due to the unique design & functionality, leveraging digital and physical store footprints in some fashion, leveraging the Internet of Things (IoT), or having some creative systems capability. Amazon has shifted from an online retailer to a digital platform that sells practically anything. It started as a book store but built an digital enterprise that not only radicalised the way books are sold or accessed and also was able to add many unrelated products and services to their core books. Amazon has been successful in most of the businesses it ventured but also saw failures such as fire phone, Zappos, etc.

Amazon continually looks to create and implement Blue Ocean Strategies. Strategies such as their Kindle E-Reading solution that eliminated the need to buy books physically, carry multiple hard copy books, raised the quality of reading experience on a hand held device which is very light and comfortable for reading in various environments, reduced to pay heavy prices for the books as eversions are cheap, reduced the need to buy storage furniture for books and created an unique experience that not only equips reading books but also do host of digital activities on the go.

Amazon Drone Delivery radicalised the last mile delivery of the goods to customer door step that eliminated the need for delivery trucks, drivers that have negative impact on environment, raised the efficiency of the delivery process and reduced the traffic congestion and other associated problems and created an unique experience that entices the consumers. plans to launch its drone delivery service, Prime Air, "in a matter of months." Amazon plans to deliver customers' orders within 30 minutes through its Prime Air delivery program, which would blow away its two-day Prime shipping and two-hour Prime Now deliveries. The Prime Air delivery program uses autonomous drones guided by GPS systems. With last mile delivery being the most expensive and time consuming part of the shipping process, drone delivery has the potential to give Amazon a leg up on other logistics companies.

Amazon's cloud service is its most profitable unit. By tapping into the power of these cloud computing systems, companies can serve many more customers for much less expense with much less downtime and much greater performance than they could through their own data centres. And as an additional benefit, they don't have to worry about maintaining their own servers. "AWS invented this market," said Dave Bartoletti, a principal analyst at Forrester Research. "They had a five-year head start before anyone else got their act together." When AWS first launched, it only offered a basic set of infrastructure services. Customers could get access to virtual servers through a service Amazon called the Elastic Compute Cloud, or EC2. They could also use AWS for file storage, through Amazon Simple Storage Service or S3.

Blue Ocean Strategy – Nestle Nespresso Digital Transformation to survive

2020-02-23T17:49:00.000+05:30

Nespresso is an operating unit of Swiss food and drink company, Nestlé that sells coffee machines, flavored coffee capsules and other coffee-related accessories around the world through its site, nespresso.com. Nestle created a blue ocean market uncontested market space within the gourmet single-cup coffee market. Nespresso created and dominated this entirely new coffee category and product consists of high quality, individually-portioned coffee in aluminum capsules for use in specially-designed machines, sold at household appliance retailers and the Nespresso shop.

Nespresso had become Nestle’s fastest-growing product line, growing at 40% annually, and the company continued to expand its coffee expertise by creating unique new blends. Nespresso was regarded as an example of Nestle’s spirit of discovery and ability to innovate and Nestle built a new consumer experience with the unique “razor-razor blade model” for coffee, technology, machine, and capsules. Nespresso was a highly profitable unit with margins of up to 50% and annual growth of 40%.

Nespresso blue ocean strategy in terms of Eliminate Raise Reduce and Create (ERRC) framework, eliminated the need for visiting high end coffee cafes with highly skilled coffee making professionals, same experience can be had at home with this machine & capsules. Raised the number of options in terms of coffee flavours in capsules, convenience at home and the high quality coffee from various regions of world can be has in the comfort of own house. Reduced the requirement to have coffee at high priced and often crowded cafes and sacrifice the satisfaction & taste that comes with instant coffees. Created a new machine that requires no expertise to operate, half prepared capsules that just need to be inserted for the best coffee experience. Created membership clubs and digital formats where consumers interact and purchase and also added direct selling channels both online and offline

By 2012, Nestle dominated the single-cup coffee market with a 34% revenue share and chief amongst the competition was Keurig Green Mountain, who had become the dominant player in the North American market. In addition, Nespresso’s patents began to expire in 2012, gradually allowing competitors to release similar machines and capsules. As competitors continued to chip away at its market share, Nespresso has been spending heavily on marketing and R&D to stay ahead, two areas in which the company is known to excel.

In the Red ocean market, Nespresso has created a transformative experience for its customers. Overall, they have enabled simple digital transactions, drove personalization and customization across channels, leveraged digital media to craft and deliver is brand, and blended digital and physical channels for a meaningful experience. Nespresso has made strides in its digital transformation is the creation of the Prodigio machine, which makes the Nespresso machine a part of the IoT revolution.

The Prodigio connects the machine to smartphone via Bluetooth technology and additional benefits through the use of its app. The Nespresso app alerts your phone when the coffee machine needs service maintenance or water tank refill and also lets you set a time for the machine to make coffee. Furthermore, the app lets you reorder capsules before you know you need them, allowing you to order with one touch. Because the individual capsules are at the core of Nespresso’s business model, the Prodigio allows Nespresso to go after this revenue.

Deployed a cloud-based customer engagement solution that integrates all consumer data (web and app orders, in-store orders, behavioral analytics, interactions with Nespresso kiosks) all in one integrated customer view that lets company to make recommendations and target media. Nespresso Cube, a digital and fully automated boutique, which offers consumers state-of-the art personalized shopping experiences and limited-edition flavors. After placing their order on a digital screen, consumers can watch robots process their orders at incredible speeds and Use of big data to derive insights and personalize products for consumers.

Blue Ocean Strategy – Stitchfix data driven styling approach

2019-03-27T12:17:00.000+05:30

Stitch Fix relies on data-driven, personal styling service that revolutionized the consumer retail experience in terms of buying apparel. Differentiation achieved by the company using its data driven approach and human stylists had led to company’s success in red ocean and highly competitive e-commerce sector Stitch Fix personalized retail at scale with large consumer base and high repeated purchase and retention.

Stitch Fix will be focused on growing its customer base, innovating on its proprietary data science capabilities, and expanding into new markets. Stitch Fix shifted the apparel retail ecommerce from a “browse-all” model to a curated, convenience-driven model associated with human stylists. In terms of Blue Ocean Strategy the company eliminated consumer problems in the shopping experience by gathering personal preferences on style, fit, and size to offer a personalized combination of hand-selected items that clients can try on in the convenience of their home and ultimately raised consumer satisfaction.

Stitch Fix reduced the costs of operations through unit economics and economies scale leading to profitably compared to typical e-commerce businesses. Stitch Fix has created a new market space that is uncontested using the combination of data and stylists, and refining algorithmic recommendations, leading to increased conversions and higher retention. The average Stitch Fix client directly provides over 85 meaningful data points through style profile.

This data combined with other sources enables Stitch Fix to provide highly personalized customer experiences. Stitch Fix also needs to maintain high retention through continual improvement of its algorithms and superior customer service. The company needs to recruit and retain high quality stylists for new product categories and its existing core women’s business in the face of increasing competition for high quality “part-time” workers with the growing popularity of sharing-economy services.

With new online and mobile commerce services being innovated consumer-centric shopping experiences are being developed that go beyond increased speed and convenience. These emerging services were possible due to understanding from a highly competitive space that has seen many companies closing. Stitch Fix is not the first to try a personalized and curated model in fashion commerce, but it is one of the most successful because of its data driven approach and blue ocean strategy adopter.

Value proposition is the company focusing on the plus styled new design men’s category that is growing rapidly equivalent to women’s category. The company also needs to focus on cutting costs further and increase buyers utility further. The market is rapidly getting crowded as large players also started to launch personalized services.

Blue Ocean Strategy – Patagonia Environmental Sustainability at the core of business

2019-03-27T10:40:00.000+05:30

Patagonia is a popular outdoor clothes brand with many styles and products made in Fair Trade Certified™ factories around the world that promote and sustainable fair labour practices, safe working conditions and environmental responsibility. Company aims to build highly durable and efficient products that last long and can be easily repaired if required and used for long period rather than throwing away with short term use. Patagonia is a socially conscious brand with a demonstrated their commitment to change the world that is their core belief that caring for our planet is not in conflict with running a successful business. The company is passionate about reducing their manufacturing footprint and is a member of 1% for the planet whereby they commit 1 percent of their annual net sales to grassroots environmental groups.

Patagonia’s Worn Wear initiative – which was launched in 2013 is composed of 4 ‘R’s.” Reduce, Repair, Reuse and at the end of a product’s life when all usable value has been exhausted – Recycle. Patagonia invites its conservationist shoppers to buy second hand outdoor wear and trade in their old gear. The experience aligns with Patagonia’s focus on resource conservation and makes customers feel like their personal actions have a positive impact on the world.

Blue Ocean strategy of Patagonia in terms or ERRC grid is eliminating CO2 emissions, waste output, and water usage by extending the life of garments, through proper care and repair, which has in important sustainable impact on the planet and reduces the need to buy more over time. Raised the consumer awareness towards environmental sustainability and preservation which is one of the most important issue today as climate change is drastically effecting the world. Reduced carbon, waste and water footprints by 20-30 percent by extending the life of clothing by nine extra months. Created a new business that not only provides good products t consumers but also reduces the environmental effects that typical manufacturing companies cause to the environment. Patagonia was recognized for its “long track record of sustainable innovation in the industry,” including its ongoing campaign to encourage consumers to repair their worn items instead of tossing them and buying new.

Patagonia value proposition is increasing the buyer utility through the fact that their buying clothes have significantly low impact on environment, reduce the cost and impact on environment and created a new market for environmentally sustainable clothing which consumers are buying and the company is earning good profits. Various initiatives by the company towards environmental sustainability has created an uncontested market space for the company. Company adopted digitization technologies to communicate with consumers there by reducing the usage of printing and paper materials. Patagonia is considered the best socially conscious innovative company and blue ocean strategy adopter.

Blue Ocean Strategy - CVS Health Innovative Healthcare propositions to Consumers

2019-03-27T09:58:00.000+05:30

CVS Health is an American pharmacy and healthcare company with nearly 10,000 stores in its network. CVS Health constantly innovates towards the health of the consumers and provide them with all the required products and services to stay healthy that became the corner stone of success for the company. CVS Health redefined its brick and motor pharmacies to transform into health care system where customers can walk in and seek help. CVS uses digitalization and mobile technology to help deliver care and where in 28 million customers receive text message for pharmacy pickup and refill reminders. As part of value innovation the company intends to utilize patient data to create a “health-engagement engine” for better health care to its customers. A major selling point of walk-in clinics such as those operated by CVS and other companies has been that they will help reduce hospital emergency room visits by giving patients a lower-cost and more convenient place to go for minor problems.

Personalization is essential part of of CVS’ front-store growth strategy through its “MyCVS” store clustering initiatives. CVS/pharmacy has also been busy leveraging its insights from its ExtraCare loyalty program to feed a more personalized, one-to-one relationship with its customers, and drive more efficient — and more lucrative — promotional investment, deemphasizing promotions on low-margin categories and prioritizing slower moving, but higher margin categories. CVS/pharmacy is investing significantly in an enhanced digital shopping experience.v

CVS moved beyond convenience offerings like drive-through and 24-hour service towards better healthcare system delivery with various allied services that increase its revenues. Apart from finding solutions to address customer concerns like the rising cost of prescriptions, which led to the creation of the Rx Savings Finder, and the desire for simplified medication schedules, which spurred the development of the ScriptPath Prescription System. Kevon Hourican described how CVS Pharmacy is working to improve the overall retail experience, with new health-focused store designs complete with “Discovery Zones” that highlight emerging products and specific wellness needs, as well as designs tailored to the communities where they are located.

Blue ocean Strategy ERRC grid in terms of CVS Health is that CVS health eliminated the need for patients to closely track the prescription medications usage worry about the availability by digitalization and providing mobile applications that track the usage and order refills, raised consumer health benefits by offering all the required products and services at single location 24 hours, reduced the costs and increased savings monetarily for the consumers and created a new healthcare system that goes beyond pharmacy and provide various health care services and become a healthcare delivery system.

Blue Ocean Strategy value proposition for CVS Health is the increase in buyer’s utility as consumers have tremendous healthcare and monetary benefits through the stores, reduced prices for the consumers and also manage costs efficiently. Key to success is the adoption of mobile and digitalization technologies to further innovate and develop new services for consumers. CVS Health is one of the most innovative Blue Ocean Strategy adopter.

Blue Ocean Strategy - Tencent Blue Ocean Search through Cross Border Investments

2018-10-24T13:19:00.000+05:30

Tencent is a Chinese gaming company which is one of the biggest companies in the world. China controls 70% of the gaming market in China and it gained the dominance through offering new games to Chinese players and connected web services. As the Chinese market matures the company is forced to look out for Blue Ocean Strategy to keep up the growth and revenues. Tencent is also an investment company where in it made massive deals like acquisition of companies like Riot that owns the biggest game in the world titled League of Legends. With focus on providing Chinese players innovative games the company modelled its M&A strategy. The company has taken over the world of gaming by finding that innovative gameplay and bringing it back into China, and it wants to keep feeding that pipeline.

“We’re always thinking blue ocean and new opportunities,” said Randy Lee, North America Business Development at Tencent explained in a conversation on stage at the GamesBeat Summit in Mill Valley, California. “That goes back to our origins before we were even into games. There were a lot of companies who were in that space, and the whole ecosystem was massively multiplayer online role-playing games. We were the small fry. But what we did is we looked at the blue ocean, so we brought in [Counter-Strike-like shooter] Crossfire from Korea, we brought in MOBAs, we brought in sports games with the licensing like NBA 2K. These were the things that Chinese players never played, but in our mind, whether you’re in China or in the West — if you like the game, you’re going to play it. League proved that.” Lee went on to say that Tencent also doesn’t mind if its investments start slow. It prefers games that build over time after finding their core audience. It is also less interested in tools than in games.

Source: https://venturebeat.com/2018/10/23/unitys-cinecast-mode-lets-casters-and-game-spectators-change-camera-angles/

Due to limited revenue potential of bringing in the popular games into the Chinese markets, Tencent started to look at cross border investments as way to keep up revenue growth. Tencent Blue Ocean Strategy focuses on investing less capital (around US$3 million) over a greater number of younger gaming companies to accumulate a larger customer base and gain a stronger footing in overseas markets. Tencent is investing in sectors like video game broadcasting, financial services and online shopping and the acquisition strategy begins with a 10 percent to 20 percent stake in either early-stage startups or more mature outfits and sell them once they reach scale and profitability. Tencent is looking to use the cost value trade-off strategy for its future growth.

Blue Ocean Strategy – Spotify Differentiation -Music Streaming instead Downloading

2018-10-24T11:48:00.001+05:30

Spotify transformed the music listening of customers who were earlier paying for downloading music and listening on devices like ipods, mobile phones, tablets, etc. by the way of unlimited music streaming online there by creating an uncontested market space and capturing new demand. The core strategy lies at providing the consumers platform that allowed them unlimited streaming free of cost and also using advanced analytics for creating the playlists according to consumer choice and mood. Riding on the improved internet connectivity and speeds that are at core for the Spotify platform to streaming music, Spotify captured the market with not only offering unlimited free music but also focusing on the consumer experience of listening to high quality music.

Value Innovation – ERRC Grid Spotify

Spotify eliminated the need for paying to buy for music either for individual tracks or music albums by offering free of cost and also need to invest in devices like iPod, etc. Spotify reduced the need for consumers managing the music by providing with music library of old and current music, search, genre-based shuffle and perfect sound quality. Moreover, with premium service consumers playlist creation, offline streaming, enhanced sound quality. Spotify raised the consumer experience to new level by offering connectivity of consumer accounts to any device, social media networks where consumers can create instant playlists, access other people’s playlists and collaborate on playlists no matter the location. Spotify raised the sound quality and experience for the consumers through software innovation.

Spotify created a new uncontested market and new demand as highlighted by more than 83 million users paying a monthly fee to play music in the home, shops, cars and offices. Spotify has created a platform that was highly convenient for the consumers not only to buy but also listen and share music. Spotify also uses the customer data for analysing the behavioural patterns of consumers and customize the offerings accordingly. Spotify has created a unique brand and value proposition that significantly created brand loyalty among the subscribers.

Spotify Losses

Spotify has made huge upfront investment in the music platform for streaming, brand design, music content by paying artists hoping to make money through premium paid services and the ad revenues from the free service. Spotify has close to 200 million users on its platform and only close to half of them are premium subscribers. Due to this Spotify is facing losses and also facing stiff competition as the streaming is no longer blue ocean but a red ocean where the competitors like Amazon, Google and Apple have their own devices like Alexa, Echo and Home pod that also stream the music and these speakers create a significant advantage which Spotify lacks. Spotify struggles in Red Ocean can be attributed to lack of value innovation which it initially delivered.

Blue Ocean Strategy – Marvel Studios success mantra cost/value tradeoff

2018-10-24T10:36:00.000+05:30

Blue Ocean Strategy – Marvel Studios success mantra cost/value tradeoff

Marvel founded in 1939, relied extremely on comics books frenzy led by editor-in-chief Stanley (“Stan Lee”) Lieber, cartoonist Jack Kirby, etc. who created new characters like super heroes Iron Man, X Men, Spider Man, Ant Man, Black man, Thor, etc. Until 1996, the company solely relied on comic books and toy sales which led to bankruptcy in December 1996, as comic book stores closed, comic book collectibles pricing collapsing and critical staff attrition. Post the bankruptcy Marvel realized that it needed to look for Blue Ocean Strategy where businesses created uncontested markets by creating new demand through innovative product and service offering thereby generating abnormal profits.

Isaac Perlmutter, Chairman(Marvel Board) recruited Peter Cuneo as CEO, who was experienced turnaround specialist who reorganized the business to create an atmosphere of creativity and risk taking rather than outright cost cutting. The idea for this was to build Marvel’s own movie studio along with deals signed with Sony to make Spider-Man movies and with Fox for X-Men movies as the revenues that were generated through Sony, Fox, etc were not enough to bring Marvel back to profitability. The first movie from Marvel own studio in 2008 was Iron man that grossed over $585 million on a $140 million budget. This movie emphasized the Blue Ocean Strategy of cost/value trade-off as the movie costed very less compared to superhero movies by other studios like Sony & Fox. All those that generate significant value need not be costly and the movie costed 30 percent less but generated gross revenues of about 2-4 times more. Marvel found the success mantra of more value and cost less to produce, breaking the value/cost trade-off.

Marvel succeeded in lowering costs by hiring quality low priced stars instead of high prices super stars, cutting the budget for expensive scenes and stunts, bringing the super hero characters more to the real life, choosing the low cost location for the studios with minimal perks and facilities, and signing the actors for multiple sequels in the first instance. The low cost high value trade off clearly worked as Marvel as the average global revenues per movie has doubled and Marvel regained its profitability. The high gross revenues for the 20 or so movies that Marvel produced highlighted that fact that not only the comic book fans and enthusiasts watched the super hero movies but also attracted those people who never were comic book fans watch these movies and become fans there by Marvel created new demand and uncontested market place for the comic book based superhero movies.

MARVEL ERRC Grid – Value Innovation

A look at the Value Innovation concept of Blue Ocean Strategy through the ERRC grid, Marvel has eliminated the competition in the super heroes movies franchise by specifically attracting the non-comic book enthusiasts to watch the super hero movies thereby creating new demand and segment for movie industry, reduced the costs associated with movies producing movies at extremely low costs, raising the quality and content of the movies that attracted movie audiences to appreciate and also bring in new audiences. The superhero movies that Marvel has been producing have been extremely successful till date and Marvel’s own blue ocean movie studio created the most valuable movie franchise in Hollywood history through the cost/value trade-off and creating new uncontested markets.

Case Study - India Monthly Car Sales Data & Forecast 2018-2020 – A Comparative Analysis using Facebook Prophet & Auto Arima using R – Time Series Forecasting using R

2018-10-16T17:03:00.000+05:30

The data used in the case study us gathered from online data sources and is collected from April, 2011 till September 2018 for all the companies in India. The Microsoft Excel Object is placed here:

India Car Sales in the H1 2018

Due to the contracted Passenger vehicles (PV) sales in September 2018 by 5.61 per cent, auto makers body Society of Indian Automobile Manufacturers (SIAM) signalled a conservative outlook by signalling a slowdown in the sector for the fiscal 2018-19. Overall the sector registered a moderate 6.88 per cent growth in the first half of 2018-19 mainly due to the fall in September 2018 sales -- the biggest monthly slump in this fiscal -- marking the third straight month of decline.

“In the first half of the fiscal, PV sales have grown 6.88 per cent and for the second half also while the outlook is positive, sales will be "slightly" higher or similar, SIAM president Rajan Wadhera told media. "For the entire fiscal, we had a forecast of 9-11 per cent growth but we are now looking more at the lower end of around 9 per cent," he added.

PV sales during the first half of the fiscal were mainly driven by rural demand and new model launches, Wadhera said. He hoped that sales growth would further improve with the onset of festive season. “In the next six months, the growth story of automotive industry will continue to be on the positive side based on strong rural demand and festive season," Wadhera said.

Monthly Car Sales Forecast (October 2018 till September 2019)

The monthly car sales data was collected from April 2011 for all the car manufacturers in India till September 2018 from news paper articles as reported by SIAM and car manufacturers in media. For forecasting, two techniques are used Facebook Prophet and ARIMA based Auto Arima function in Forecast package of R.

Facebook Prophet

Prophet is optimized for the business forecast tasks based on challenges Facebook faced internally related to hourly, daily, or weekly observations with at least a few months (preferably a year) of history, strong multiple “human-scale” seasonality’s and important holidays that occur at irregular intervals that are known in advance (e.g. the Super Bowl), reasonable number of missing observations or large outliers, historical trend changes, for instance due to product launches or logging changes, trends that are non-linear growth curves, where a trend hits a natural limit or saturates.

How Prophet works

At its core, the Prophet procedure is an additive regression model with four main components:

· A piecewise linear or logistic growth curve trend. Prophet automatically detects changes in trends by selecting changepoints from the data.
· A yearly seasonal component modeled using Fourier series.
· A weekly seasonal component using dummy variables.
· A user-provided list of important holidays.

Source: https://research.fb.com/prophet-forecasting-at-scale/

ARIMA Modelling

ARIMA stands for Auto-Regressive Integrated Moving Averages popular time series forecasting model. ARIMA models work on the following assumptions – Stationarity of Data i.e. the mean and variance should not vary with time and input of univariate time series data i.e. Date Column & Sales in Unit Columns only

ARIMA has three components – AR (autoregressive term), I (differencing term) and MA (moving average term). ARIMA(p,d,q)

AR term refers to the past values used for forecasting the next value. The AR term is defined by the parameter ‘p’ and value is determined using the PACF plot.

MA term is used to defines number of past forecast errors used to predict the future values and ‘q’ represents the MA term identified using ACF plot

Order of differencing specifies the number of times the differencing operation is performed on series to make it stationary. Test like ADF and KPSS can be used to determine whether the series is stationary and help in identifying the d value.

Implementation in R

library("prophet") # This is Facebook Prophet Package

library("forecast") # Forecast package for Auto Arima

library("ggplot2") # DATA VISUALIZATION PACKAGE

indiacarsales=read.csv(file.choose())

# The above command helps to import the data from anywhere on the laptop or desktop

head(indiacarsales) # First 6 rows of data

tail(indiacarsales) # last 6 rows of data

summary(indiacarsales) # Basic Descriptive Statistics

str(indiacarsales)

# str - Data Structure & Individual variable types. if you observe Date format is not correct shows factor & Need to convert Date to proper format using as.Data

indiacarsales$Date=as.Date(indiacarsales$Date,format="%d/%m/%y")

str(indiacarsales) # Now Date is shown as Date format

# Data frame has 3 columns Date, Company, Sales(units) We need only Date & monthly Sales(units)

# Aggregate Data into Total Monthly Sales of all brands & Create a new DataFrame of the Monthly Sales

monthlysales=aggregate(. ~Date, data=indiacarsales,sum,na.rm=T)

monthlysalesdf=monthlysales[-2]

# Deleting the Company Column

summary(monthlysalesdf) # Basic Descriptive Statistics

plot(monthlysalesdf$Sales.in.Units,type="l")

# line plot of monthly sales of cars in india

colnames(monthlysalesdf)=c("ds","y")

# Rename colnames Date as "ds" & "y" Sales(units) & This required as per Facebook Prophet Package

monthlyforecast=prophet(monthlysalesdf, seasonality.mode = "multiplicative")

#This time series has a clear yearly cycle but the seasonality in the forecast is too large at the start of the time series and too small at the end. In this time series, the seasonality is not a constant additive factor as assumed by Prophet, rather it grows with the trend. This is multiplicative seasonality. Prophet can model multiplicative seasonality by setting seasonality_mode='multiplicative' in the input arguments.

future=make_future_dataframe(monthlyforecast,periods=24, freq="month")

#Creating Dataframe for future forecast for next 2 years monthly forecast 24 months, frequency must be specified as "month"

forecast2year=predict(monthlyforecast,future)

# Using the model & prediction time frame exceute predict

plot(monthlyforecast,forecast2year)

# plot the car sales date with forecast for next 24 months

prophet_plot_components(monthlyforecast,forecast2year)

# See the decomposition of the forecast elements

######## ARIMA FORECAST using the foecast Package #####

carsales=monthlysalesdf$y # SELECT ONLY SINGLE COLUMN SALES in UNITS

carsalests=ts(carsales,start=c(2011,4),frequency = 12)

# CONVERT DATA INTO UNIVARIATE TIME SERIES USING TS

# FUNCTION, WITHOUT CONVERTION THE MODEL DOES NOT WORK

fit=auto.arima(carsalests)

# FITTING THE MODEL USING THE AUTO.ARIMA FUNCTION

summary(fit)

# SUMMARY OF THE ARIMA MODEL INCLUDING ACCURACY DIAGNOSTICS

# ROOT MEAN SQUARED ERROR, MEAN ABSOULTE ERROR,AIC & BIC

fitforecast=forecast(fit,h=24)

# FORECASTING FOR THE NEXT 24 MONTHS

plot(fitforecast)

# LINE PLOT OF THE FORECAST

arforecast=ts.union(fitforecast$fitted,fitforecast$mean)

arima=pmin(arforecast[,1], arforecast[,2], na.rm = TRUE)

# CONVERTING THE FORECASTS INTO A DATAFRAME FROM TIME SERIES OBJECT

predictcompare=data.frame(Date=time(arima), arima=as.matrix(arima), prophet=forecast2year$yhat)

# THE COMPARITIVE DATAFRAME OF BOTHE PROPHET FORECAST & ARIMA FORECAST

# USING GGPLOT TO PLOT BOTH FOR COMPARITIVE ANALYSIS

ggplot(predictcompare, aes(Date)) +

geom_line(aes(y = arima, colour = "arima")) +

geom_line(aes(y = prophet, colour = "prophet"))

# PLOTTING USE BASE FUNCTIONS & NOT GGPLOT PACKAGE

plot(predictcompare$arima,type="l",col="blue",yaxt="n",ann=F,xaxt="n")

par(new=T)

plot(predictcompare$prophet,type="l",col="yellow",yaxt="n",ann=F,xaxt="n")

par(new=T)

plot(monthlysalesdf$y,type="l")

ARIMA OUTPUT

Series: carsalests

ARIMA(1,1,1)(1,0,0)[12]

Coefficients:

ar1 ma1 sar1

0.3503 -0.8838 0.6281

s.e. 0.1238 0.0572 0.0857

sigma^2 estimated as 314686491: log likelihood=-998.81

AIC=2005.61 AICc=2006.09 BIC=2015.57

Training set error measures:

ME RMSE

Training set 2497.539 17340.72

MAE MPE

Training set 13364.85 0.5996624

MAPE MASE

Training set 5.786336 0.6909754

ACF1

Training set -0.006334485

Co-creation @ Kellogs – Fruit Loops unveils Fashion Brand AWAYTOMARS

2018-08-31T11:46:00.000+05:30

AWAYTOMARS/Froot Loops collection is a co-created, unisex, limited-edition collection of 10 pieces that were sparked by the fun spirit, colorful aesthetic and fruity taste of the iconic Froot Loops. According to a press release, nearly 700 designers participated in fashion pioneer AWAYTOMARS’ unique co-creation model to develop the collection’s hats, t-shirts, sneakers, hoodie, jacket and dress. From color-blocking a bomber jacket to look like Toucan Sam to designing a spacey sneaker print featuring purple Wild Berry stars, the AWAYTOMARS community concepted, developed and finessed each design, before the company created a prototype and manufactured the final pieces.

“So many of us have memories associated with colorful bites of Froot Loops, and through the power of our co-creation community, we quickly expanded our designs beyond the cereal’s bright red box,” said Alfredo Orobio, AWAYTOMARS founder. “Together, we found a way to infuse the fun, playful spirit of Froot Loops and tie the capsule to the full AWAYTOMARS Spring/Summer 19 collection, which is inspired by the visuals of early 20th-century silent movies.”

Kellogg is finding other ways to address its category’s challenges in winning millennials by reinventing a traditional CPG giant and its brands for the new era of better-for-you foods. Though it faces bottom-line challenges from lower prices and higher trucking costs, innovative new products and marketing have stabilized Kellogg’s share of the declining ready-to-eat cereal category

Source: https://www.brandchannel.com/2018/08/25/kelloggs-innovates-out-of-soggy-sector/

Co-creation @ Shigiya Machinery Works – Industrial Manufacturing

2018-08-31T11:32:00.001+05:30

Norikazu Shigitani, President of SHIGIYA MACHINERY WORKS LTD. Talks of hos the company pioneered the utilization of co-creation concept to meet various customer needs, in different sectors like the automobile, electronics, IT or other businesses. He discusses the role played by the ‘co-creation’ concept in Japanese industry for providing an excellent product quality and quality of service.

In a an interview to worldfolio, Norikazu Shigitani explains,” For example, in our production of cylindrical grinders, our sales teams will listen to the needs of our customers. This information will then be relayed to our design department where our staff will model products according to the exact requirements of our customers. Our assembly team is then in charge of putting components together to obtain a final product that can then be delivered to our clients. In this way, we have highly qualified employees who oversee every single step of the development and production processes so that we can provide our customers with equipment of the highest quality. It is this collaborative system, this ‘co-creation’ that we and other Japanese companies have adopted that allows us to thrive. This ‘co-creation’ extends past the collaborative approach undertaken by teams within individual companies – Japanese companies actively work with one another in order to better our products and stay relevant. We believe it is important to work together and think together and the Japanese manufacturing system excels in this endeavor.”

He also explained another instance When Honda was expanding its operations overseas, particularly to the US, they were looking into the production a novel type of engine (CVCC engines) for their cars. For this engine, they required very specific components that they asked us to develop and provide for them. The job was demanding and proved to be a challenge for our company, but it was one we accepted and successfully delivered on. That event was significant in Shigiya Machinery Works’ path towards technological improvement.

Source: http://www.theworldfolio.com/interviews/shigiya-machinery-works-the-art-of-cocreation/4545/

Co-creation @ Hotel Design Elkus Manfredi

2018-08-31T11:16:00.001+05:30

Co-creation at Elkus Manfredi utilizes the employee’s expertise who are extremely familiar with customer’s daily needs provide their input through the phases of the design process which ultimately enhanced guest experience at three of their exclusive properties. “To design hotels that express a premier brand in fresh, innovative yet consistent new ways, Elkus Manfredi Architects applies a discipline we call ‘co-creation’. From the very beginning, we bring a diverse set of contributors to the design process. Developers, architects, graphic artists, interior designers, engineers, textile designers… an entire orchestra of talents assembles to create the symphony of innovative design.”, said Elizabeth Lowrey.

Since each hotel is designed in unique way best employees creative and critical insights in terms of unique customer profiles, location significance and preferred brand experiences are prioritized by the designers and the hotel design process includes them. The design team along with property owners and managers initialize the top level goals and the process of gathering insights kickstarts through casual and formal conversations with employees from all levels right from bottom to top level. Other strategies include brain storming sessions and storytelling methods are also used. As design elements evolve, the team returns to particular employees for reaction, always keeping top leadership in the loop. Sometimes leadership is surprised by the creative contributions of front-line employees, whose suggestions are based on guests’ daily experiences as well as a hotel’s brand aspirations.

Co-creation builds a sense of ownership among employees and other stakeholders resulting in improved design and creates a sense that employees are heard and valued. Managers learn things they didn’t know about operations, including ways to improve their staff’s workplaces and job satisfaction. The design process improves the teamwork, enhances employee recognition thus leading to customer-centric employees. With co-creation, employees and designers together set the stage for a beautiful production that lets the audience walk away happy.

Blue Ocean Strategy India – Honda Activa Scooters dethroned motorcycles in India 2 Wheeler market

2017-02-26T11:56:00.000+05:30

The iconic motorcycle brands Hero Honda’s Splendor and Bajaj’s Pulsar had successfully moved Indian consumers from iconic scooter brands Bajaj Chetak & LML Vespa in the year 2000. Motorcycles took over scooters since then and the market for the motor cycles grew exponentially in India until Honda India’s iconic automatic scooter Activa dominated the India two-wheeler market sales for seven consecutive months from January 2016 till July 2016. Honda Activa, the automatic scooter was design built and launched in the year 2001 with a unisex appeal targeting both men and women. Women empowerment was facilitated to some extent by Activa as women bought this scooter for their professional and domestic needs. Kinetic Honda was a successful automatic scooter that Honda initially launched which was also woman oriented. Honda Activa had emerged as a most preferred daily commute 2 wheeler vehicle both in urban and rural India. Yadvinder Singh Guleria said: “Activa today represents the metamorphosis of the society. The superior convenience, unisex appeal coupled with product features -- increased mileage, style and technology -- has converted millions from pillions to riders.”

Yadvinder Singh Guleria, senior vice-president, sales and marketing, Honda Motorcycle and Scooter India in an interview to Business Standard highlighted, “Activa included four-stroke technology and tuff up tube — a double-layered tube with a sealant. All of this, made the scooter business a “blue ocean" (creation of an uncontested market space) for Honda, even as Activa evolved over the years with innovations such as the company’s eco technology in 2012 that further enhanced mileage and nearly bridged the gap with 100cc motorcycles. The country’s economic growth also opened up a market of women users. With education and empowerment of more women, they stopped being dependent on men. This added to the “scooterisation" of the country. In rural areas, poor roads have for long tended to favour the sturdier motorcycles. But, with increased motorisation and more metalled roads, there are signs of greater acceptance of scooters. “Another positive change is the acceptance of working women, many of whom are employed in the health and education sectors and have their own commuting needs."

In terms of Eliminate, Raise, Reduce & Create grid, Activa eliminated kick start and provided automatic start, designed in such a way that both men and women can use Activa. Activa also raised the mileage per litre closer to 100 cc motorcycle mileage, reduced the maintenance cost and created a unisex automatic scooter urban market. Initially Activa was targeted as intracity vehicle but as the rural roads improved the rural adoption also increased. Even today the company dominates the uncontested market it created 17 years age and despite many competitors launching automatic scooters, the company has close to 18,000 back orders in 2016, which speaks of the consumer trust and confidence it has built. Activa has over 12 million customers in India despite the fact that there had been always waiting period for the consumers in buying Activa scooters and consumers had options from Honda competitors without any waiting periods. The Activa customers happily adopted the 100cc Activa in 2001 and the company successfully upgraded the consumers to 110cc and 125 cc without any consumer demanding or complaining and the company may do it again by moving consumers to 150cc. For, as Yadvinder Singh Guleria says, “it is all about creating new demand and guarding one’s turf.”

Blue Ocean Strategy India Financial Services Industry – Axis Securities 3 pronged competitive strategy

2017-02-26T11:05:00.000+05:30

Axis Securities Ltd, a 100% subsidiary of Axis Bank had in a very short span grew to be one of the Top Financial services players in India. For the most part of the year 2016, Indian Stock Markets have seen muted growth due to the global macroeconomic factors that affected all the developed and developing markets. Rising yields in United States and weak macroeconomic indicators in emerging markets had made investing in markets tough. Foreign fund outflows also affected Indian market but the outflows were compensated by domestic fund flows into equity markets. With the real estate market going through tough legislative changes there had been investment flows increase into financial assets. There had been significant rise in the retail investors interest in mutual funds as the industry saw record fund flows as investors bought in SIP’s and mutual funds to stay invested in the subdued market.

Axis Securities adopted technological innovation through its website and mobile app Axis Direct as explained by Arun Thukral, MD & CEO, Axis Securities in an interview to BW Businessworld, “Constantly innovating our mobile app and significant increase in trade volumes through the app. We have also revamped our website to provide a simplified, delightful user experience and works on all devices be it mobile, tablet, desktop or laptop. We realize that users prefer to access content in the form videos and not text. That is why most of our research reports and learn courses are now in the form of quick 2-3 minute videos. We also understand that people want information on a real-time basis to take decisions, it was therefore imperative that our customer facing emails are live i.e. whenever the user opens the email they see the real time information in terms of stock price, research updates, market news, portfolio etc. For this industry first innovation, we have won awards by DMA not only in India and Asia but also at an international level.”

Axis Securities blue ocean strategy as highlighted by Arun Thukral, MD & CEO, Axis Securities in an interview to BW Businessworld, “we are among the top 5 players in the industry in terms of customer base, new acquisition & active investors. I am happy to share that we have been awarded as the best growing equity broking house for the last 3 consecutive years by BSE and D&B. Our strategy is 3 pronged - Go deep, stay agile and aim for customer delight. We believe that India is deeply under penetrated with 3 per cent population participating in the equity markets and the potential for expansion is enormous. We want to therefore take the Blue Ocean Strategy and reach out to new customers by creating more awareness about the benefits of equity as an asset class. We want to stay agile and lead technology innovation by taking big strides in mobile technology in form of simple yet powerful user interface and introduction of voice based investing. Last but not the least; we want to create customer delight through great user experience across channels.”

Despite the tough environment and turmoil to continue into the current year 2017, Axis bank is focusing on new customer acquisition through more awareness, using mobile apps and technology innovations to enhance customer delight and increase its market share and revenues. Through a structured customer life cycle management Axis securities customers can create efficient portfolios as the company is also a full-fledged investment solutions provider.

Case Study - Indian IT Industry Performance 2016 – Technical Analysis using Charts & Technical Indicators

2016-12-24T12:00:00.003+05:30

The $150-billion Indian IT industry has been slowing down since the past couple of years as the clients are decreasing the budgets on traditional outsourcing work, and the Indian IT vendors failure to balance the fall with growth in emerging areas such as social media, analytics and cloud. Furthermore automation has killed the routine maintenance work IT infrastructure & Applications management where fresh engineering graduates were typically employed. Added to this, Donald Trump election as President of United states further complicated things. Arup Roy, research director, Gartner, in an interview to Business Standard said, “Now with Donald Trump, administration will add to the industry’s woes. The Trump administration’s protectionist views would have further dampening impact on growth prospects, if the views were to crystalise into some serious policy implementations.”

The Indian IT industry’s trade body, Nasscom, in a statement said that Trump’s observations regarding outsourcing and high-skilled immigration “were based on fabrications put out by critics of the sector.” Nasscom said that it would be keen to engage with the Trump administration. “Our sector plays a key role in helping US businesses innovate and grow and make corporate America more competitive.” For many years the Indian IT industry has been subjected to an anti-outsourcing backlash in the US ranging from facing certain class action suits to visa fees hikes drastically that significantly increased cost of operations of Indian IT companies. To negate this backlash Indian IT companies have significantly invested, build and recruited local talent through the development centers set up in various states in United States.

The slowdown in the Indian Industry has affected the performance the shares of the Top 5 Indian IT Companies in the past one year (January – December 2016). As an investor one needs to understand the performance of the companies in the last one year so as to predict the performance in the next one year. Using the technical analysis, charts & technical indicators build a case to understand which companies are doing better and which companies are not doing well.

R Code for the above Charts:

getSymbols("TCS.BO")

TCS2016=TCS.BO["2016-01-01::2016-12-24"] # Subsetting Data for 2016

chartSeries(TCS2016) # Candle Stick Chart

addSMA() # Red Line on Graph

addEMA() # Blue Line on Graph

addBBands() # dotted red lines on chart

addRSI()

addMACD()

addMomentum()

addROC()

getSymbols("INFY.BO")

INFY2016=INFY.BO["2016-01-01::2016-12-24"] # Subsetting Data for 2016

chartSeries(INFY2016) # Candle Stick Chart

addSMA() # Red Line on Graph

addEMA() # Blue Line on Graph

addBBands() # dotted red lines on chart

addRSI()

addMACD()

addMomentum()

addROC()

getSymbols("WIPRO.BO")

WIPRO2016=WIPRO.BO["2016-01-01::2016-12-24"] # Subsetting Data for 2016

chartSeries(WIPRO2016)

addSMA() # Red Line on Graph

addEMA() # Blue Line on Graph

addBBands() # dotted red lines on chart

addRSI()

addMACD()

addMomentum()

addROC()

getSymbols("HCLTECH.BO")

HCLTECH2016=HCLTECH.BO["2016-01-01::2016-12-24"] # Subsetting Data for 2016

chartSeries(HCLTECH2016)

addSMA() # Red Line on Graph

addEMA() # Blue Line on Graph

addBBands() # dotted red lines on chart

addRSI()

addMACD()

addMomentum()

addROC()

getSymbols("TECHM.BO")

TECHM2016=TECHM.BO["2016-01-01::2016-12-24"] # Subsetting Data for 2016

chartSeries(TECHM2016)

addSMA() # Red Line on Graph

addEMA() # Blue Line on Graph

addBBands() # dotted red lines on chart

addRSI()

addMACD()

addMomentum()

addROC()

Non Linear Revenue Model @ Indian IT Industry – Banking on Automation & Artificial Intelligence reshaping Organizational structure

2015-09-23T12:16:00.000+05:30

Non Linear revenues refer to growing revenues faster than growth in number of employees which leads to increase in both revenue per employee and profitability. Indian IT services companies such as TCS, Wipro Ltd and Infosys Ltd with a target to increase nonlinear revenues had started building expertise & skills in the areas of automation and artificial intelligence. With a target of increasing 20% revenue per employee in its IT Infrastructure division Tata Consultancy Services (TCS) has introduced artificial intelligence (AI) platform, Ignio. Wipro was the first Indian IT services firm to launch an AI platform HOLMES, or “heuristics and ontology-based learning machines and experiential systems”. Along with improving productivity and margins, this nonlinear strategy of Indian IT firms is aimed at creating differentiated offerings that will help them to acquire high margin outsourcing contracts that were previously dominated by global players like IBM, Accenture.

TCS had launched Ignio as “paid pilot” projects for 18 clients, whereas Wipro has about 70 projects running on HOLMES, and Wipro expects to offer it to up to one-third of its 1,000+ clients in the next 24 months. Infosys has about 32 projects in this category and its CEO is pushing for more. There has been a dramatic fall in the hiring levels of the Indian IT companies in the past few years due to the automation and artificial intelligent platforms. Major Indian IT players are investing heavily in automation tools, platforms, and intellectual property (IP)-based growth as the market is expected to grow further in near future.

NASSCOM hiring data highlights Indian IT Industry have hired 14,350 engineers for each billion dollars in revenues for the year ended March 2015, up from 13,505 recruitments for every $1 billion in the previous year ended March 2014, 21,185 engineers per billion dollars in the year ended March 2013, and 18,893 engineers per billion dollars in the year ended March 2012. There has been a constant fall in the overall net hiring of IT professionals by Indian IT Industry as a percentage of the total talent supply that includes engineers and postgraduates in computer science in the past five years. For example, while the engineering graduate output of Indian universities stood at 1.5 million a year in FY15, up from 0.3 million in FY05, net hiring in the sector remained stagnant at around 0.25 million over the past five years. This has resulted in a huge demand-supply mismatch.

Automation & AI strategy is also reshaping the pyramid-shaped organisational structure in of Indian IT sector as the lower level is moving up towards the mid-levels there by increasing pressure on the middle management to re-skill themselves for the skills required lower down in the hierarchy or lose the job. The organisational structure in the sector is expected to look like a diamond than a pyramid over the next three to five years. Non-linear and automation will increase in near future but that does not necessarily mean that there will be no more opportunities for people as most of the Indian IT players rely on linear growth model where more employees are needed for increasing the revenue growth. It’s a mixture of both linear and nonlinear growth for the Indian IT industry for the next five years. With a slowdown in the IT budgets of the clients, Indian IT players cannot ignore nonlinear revenue models.

Blue Ocean Strategy – Thomas Cook India – Focussing on School Student Education Tours

2015-09-01T15:39:00.000+05:30

Thomas Cook India the oldest travel & tourism company, founded in the year 1881 was initially into foreign exchange business. In the past couple of years the company did some major acquisitions like Sterling Holidays ( time-share and holiday resorts company) in February 2014 and recently in August 2015 acquired Kuoni's India and Hong Kong businesses including SOTC and SITA in India. Both the acquisitions highlight the strategy adopted by Thomas Cook India which is digital business focus and targeting the emerging travel segments in India School Student Tours, Woman travellers, retired travellers and middle class travellers. Particularly Kuoni has a strong brand recall for its brands SOTC and SITA, SOTC is a very popular brand for group tours and the company will integrate Kuoni as an independent brand in the company.

Thomas Cook’s Blue Ocean Strategy is to target the school children who go on tours both domestically and foreign as part of the school learning process. A flood of international schools across India offering global curriculum and foreign languages & culture as part of the syllabus has created a unique market which is untapped and Thomas cook is the first company targeting this huge potential market. Students and parents are willing to spend for preparing their children for global education and career opportunities and this student travel market is expected to grow by 200-300% in the next few years. Thomas Cook (India) has with an aim to target the student market set up and exclusive vertical within the company 'Travel Quest Study Tours' and outreach to the students further strengthened by a travel quiz- Thomas Cook Travel Quest – India’s first national travel quiz for school students. The company is spending Rs 2-2.5 crore on media alone and around Rs 5 crore on organising the quiz programme according to Economic Times Article. The quiz program conducted in partnership with Grey Caps India (Onstage Quizzing & Knowledge Services Company) over period of four months covering 5 lakh students in classes 6 to 9, in 1100 schools and 16 cities in India. (Source: Thomas Cook Press Release)

Mr. Madhavan Menon, Managing Director, Thomas Cook (India) Ltd. said, “Today, experiential learning is clearly a vital ingredient for India’s young minds and travel is indeed the best teacher! Our national travel quiz - Travel Quest, was created post in-depth research as an engaging platform to reach out to students and educators- to look beyond the classroom and conventional methods of learning.” He added “Our strategic business intent is clear: to address the business opportunity posed by the growing student market in the absence of organised players in the market. Our aim is to bring progressive academic curriculum to life with hands on approach to learning, allowing students to engage in a healthy mix of fun and relevant education.” Mr. Menon concluded saying, “The latent demand is evident and the early response has been encouraging: our Team has as part its quiz school outreach, confirmed over 5 school student tours to destinations as diverse as Ranthambore, Singapore and Netherlands- in just over a month since we began our school outreach” (Source: Thomas cook press release). Clearly the student tour market is uncontested blue ocean market where in Thomas Cook is creating a first mover advantage and is creating good revenue potential for future growth.

Blue Ocean Strategy Apple Inc. – Essential to survive in Crowded & Oversupply Market

2014-12-02T12:20:00.000+05:30

Apple with its disruptive innovations like iPod, iTunes, iPhone, iPad, iCloud have not only fascinated the customers but also made these devices an integral and essential part of their lives. Customers feel Apple products as completely new despite the fact that smartphones, MP3 players, online music stores existed even before Apple developed them and also customers feel Apple products and services resolve problems and make their lives better. Apple markets its products based on functionality and usability not on the technical specifications of products as compared to its competitors the technical specifications are weak. For example iPad processor compared to competitors’ tablets is comparatively slower but Apple focused on the thinness and light weight of product to cover the weakness. Apple has also been successful to take advantage of its ecosystem and offer products that seamlessly worked and made the customer’s life easier. Apple initially began as Personal Computer manufacturer like Macintosh computers but now its product portfolio is dominated by iPhones, iPads and iPods. It is also argued that Apple is more a design-driven company rather than a technology-driven company and it created products that are far beyond customer’s expectations and thinking. Basically Apple creates a product that customers do not expect, build a need for the product among customers and quickly scale up the market and in between make life difficult for their competitors as competitors struggle to keep up with Apple’s products thereby losing market share to Apple.

In an interview published in Forbes, Dan Schawbel interviewed W. Chan Kim, the BCG Chair Professor of Strategy and International Management at INSEAD, Co-Director of the INSEAD Blue Ocean Strategy Institute and co-author of Blue Ocean Strategy Book, said “Our study shows that blue ocean strategy is particularly needed when supply exceeds demand in a market. This situation is applying to more and more industries today and will be even more prevalent in the future. Let me illustrate this using the example of Apple. The company was once a PC maker in a mature and unattractive industry. By making a series of blue ocean strategic moves such as iPod, iTune, iPhone, and iPad, Apple not only achieved sustained profitable growth, but also revitalized the declining consumer electronics industry. Apple achieved its success not by investing in what was hot in the marketplace, but by making strategic moves to lead and shape the evolution of a declining industry. From the perspective of blue ocean strategy, companies seeking profitable growth should not focus their efforts on identifying an existing lucrative market, but should set out to create and capture one.” Apple has consistently redefined the industry boundaries, created uncontested market space and its products and services always focused on delighting customers and making them essential part of their lives. Apple products eliminates the problems, raises the functionalities and expectations of customers, reduces the problems of usage and creates a need for the customer and make them use their products for long time. Apple profitability and revenue growth can be directly attributed to Blue Ocean Strategy and company constantly needs to find Blue Oceans in Red Oceans so that it continues its profitability growth. Without its charismatic founder Steve Jobs, company has to continue its journey of creating new products and services and fascinate customers.

Blue Ocean Strategy Tesla Motors – Allowing Competitors access its patented technology

2014-10-23T13:15:00.000+05:30

Tesla Motors, Inc. designs, manufactures, and sells electric cars and it is the first company that combined the features of the green vehicles that generate zero emissions with that of a premium sports vehicle, basically it provided an electric car that is not only environmentally friendly but also fast and powerful. Till Tesla Roadster, the company’s first vehicle that used lithium-ion battery cells as fuel, it was believed electric cars were small, slow, not suitable to travel long distances and expensive to fuel. The Roadster had a sports car look, accelerates from 0-60 mph in 4 seconds with a top speed of over 130 mph, can be charged anywhere and has a much wider range of over 200 miles per charge which was first for any electric vehicle at that time. Tesla created an uncontested market space in terms of high performance electric cars that are high speed but with zero emissions targeting the environmentally conscious customers who are ready to pay top buck for cars that are extremely environmentally friendly. Tesla eliminated the traditional fossil fuel gasoline usage that emits carbon emissions that harm the environment and also maintenance costs related to motor oils and filters and also reduced the service maintenance costs and also the charge time for its battery fuel cells. Tesla also raised energy efficiency of the cars, driving range per charge, acceleration speed and created stylish and performing electric car that can be charged anywhere with its built in battery charging system that plugs into commonly used outlets. The current size of the electric car market is just 1% of the overall car market size and Tesla Motors is planning to increase the market share.

Instead of withholding to its highly patented technologies, Tesla Motors granted access to its competitors all its intellectual property so that the competitors can also use these technologies to develop innovative electric cars and expand and grow the market size. Tesla Motors in order to increase its sales and market has to work with the traditional automakers that are also looking to manufacture new hybrid vehicles that run both on electric and gasoline. With more charging stations and other infrastructure in place more electric cars will be sold leading to economies of scale that reduce the cost of production which ultimately lead to low price of the cars. Currently electric cars are priced very high and are not affordable to most of the customers only the affluent customers can buy them. The company has announced to build a $5 billion battery factory in partnership with Panasonic that manufactures batteries for cars in quantities that exceed Tesla’s needs but also supply to other electric car manufacturers too. Tesla is also working with other industry layers to build common industry standards for charging stations and plugs so that all the electric cars can use same charging stations and also building the battery fuel cell standards too. Tesla wasn’t first with an electric vehicle but it pioneered the concept of electric cars and combined with superior design and strong technical leadership, it offered an innovative high performance car that attracted the customers. Tesla Motors beat the competition with a superior car with innovative features and created a new “green performance vehicle” market space. With the market expansion, Tesla Motors is expected to profit significantly as it has a significant advantage in terms of first mover advantage and access to key resources and technologies like the battery fuel cells. After creating a new market space, tesla Motors current mission is to increase the number and variety of electric cars available to the mainstream consumers.

Blue Ocean Strategy Amazon Web Services – Leading the Cloud Computing Red Ocean

2014-10-23T11:05:00.000+05:30

Amazon started its cloud computing business Amazon Web Services in 2006, which that point was a disruptive innovation where in Amazon offered customers computing power and storage on demand at a low price. The Amazon Web Service (AWS) offering relies on company’s core technology infrastructure that was built to drive its ecommerce business and content business, also made cloud computing cheaper and more accessible at a very large scale. Jeff Bezos took a big risk in the year 2006 and utilizing Amazon’s vast experience in digital business, created a new business model for AWS and also created a first-mover advantage, and the high growth that goes with it, for the company. AWS offers its services at a drastically low prices and it initially targeted the startups that are highly price conscious, which proved highly successful as innovative web businesses like location-based social network Foursquare, document sharing site Scribd, crowd based review business like Yelp, etc. subscribed to AWS. AWS is based on Amazon strategy of not charging high initially for hardware but charge customers on long term use of the services (pay as per usage) which is a win – win for both the company and customers.

AWS has been a fast growing business within the Amazon business portfolio and it clocked revenues of $3.1 billion in 2013 and is expected to grow by 58% in 2014 according to a new estimate from Pacific Crest Securities. n a research note, Pacific Crest says it expects the business to keep growing at a clip, with revenue hitting $6.7 billion in 2015. Despite risks involved in cloud computing like cloud outages where in the websites of the companies that use AWS during outage will go down and do not function, still use Amazon’s web services clearly knowing risk involved, but the incentives of quick and inexpensive forcing smaller companies and startups to gamble rather than pay more high charges for a simple guarantee their services will never go down. AWS over the years has built a significant share in the cloud computing market wherein it even attracted the Fortune 500 companies and government departments to use its services. The reason behind the AWS success can be attributed to the low pricing that the company offers its customers. Amazon web services have lowered prices 31 times since it launched in 2006, including seven price reductions so far in 2013.

The price war highlights that the cloud computing market is a red ocean where in there is serious competition from major players like Google, Microsoft, Oracle, etc. and plenty of medium and smaller players. AWS is still leading this highly competitive market and building significant revenues from this business offering. Forrester Analysts forecast the public cloud market, the market segment AWS leads will grow from $4.7bn in 2013 to $44bn in 2020 as the market shifts towards replacement of current systems which also highlights the potential the AWS has in future. Amazon is further planning to reduce pricing but increase the performance and functionality of its offerings. Amazon has implemented a rich software infrastructure to allow users access to large quantities of computing resources at rock-bottom prices. Amazon Web Services accounted for 37% of the $9 billion infrastructure as a service (IaaS) market in 2013, according equity research company Evercore. The IaaS market is growing by 45%, but Amazon Web Services has a growth rate of 60% and it built a huge computational capacity.

Blue Ocean Strategy – Air Asia Innovation & Blue Ocean strategy targeted non customers

2014-09-22T19:59:00.000+05:30

Air Asia did not target the traditional customers of Airlines and did not compete with the strong local player Malaysian Airlines but it focused on the multiethnic population of Malaysia that included Chinese, Indian, Indonesian, Thai, etc. who never traveled or cannot afford the airline fare. Basically traditional airlines never focused on these set of customers, Air Asia founder Tony Fernandes saw a potentially untapped and uncontested market space in this category in South East Asia. There were Southwest Airlines in United States and Ryan Air in Europe that operated on similar low cost model that were hugely successful. Tony Fernandes took over a struggling airline and turned it into a highly profitable brand. The customer segment that Air Asia targeted was first time flyers, middle class flyers, students, laborers going home for vacation and other highly price sensitive customers. Air Asia created a value innovation propositions to the customers by focusing on factors that are of great value to the customers such as point-to-point travel system, easy booking system, no frills, destinations where traditional airlines did not fly, etc. which ultimately aided Air Asia to reduce cost and increase the value to the customers. Air Asia is no frills airline that follows a quick turnaround model and offers low fares to customers. Air Asia grew at a fast pace with good profitability and ventured into other businesses like hotels, etc. Branding is also key to Air Asia’s success – along with its low cost operations.

Air Asia operated to destinations like Bandung, Angkor Wat, Chiang Mai and other small city destinations where no other airlines flew and it not only transported tourists, first time flyers but also the laborers who go home for vacation for whom time is a very critical factor. Most of the Air Asia customers do not need luxury airport lounges or seats in airplanes, food or attendant services as these flights are short haul most of them for only one hour. By eliminating all these services and through highly efficient online ticket booking system without any agent’s involvement Air Asia is able to offer low fares and more frequent flights to high demand locations lead to huge profitability to the company. The frequency of the flights is achieved by short turnaround time. The Air Asia group's philosophy is to make sure the route is profitable within 12 months. If it's not, it will not operate the route. Every subsidiary airline within Air Asia group tailors its operations according to its own individual needs unlike a traditional network carrier. In an interview to INSEAD Knowledge, Tony Fernandes said “What does the market want? Nine times out of 10, when you go for what the market wants, it’s something that’s different. That’s why invariably everything we’ve done is kind of Blue Ocean, except for Air Asia X (Air Asia’s new long-haul operations) which is completely Blue Ocean. But we weren’t the first to invent low-cost travel, we weren’t the first to invent a low-cost hotel. We’ve taken it to another level, but we’ve been a bit Japanese in taking it, and adapting it, and making it better for our part of the world.” This comment shows that attitude of Tony Fernandes who believes that businesses need to constantly innovate and try to create blue oceans that not only bring value to customers but also profitable to the companies. Air Asia has rewritten the boundaries of aviation industry in the South & South East Asia by creating a new user segment in the industry.