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

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.

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

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.”