Managing Innovation: Blue Ocean Strategy and its Application in Starbucks

This report focuses on the Blue Ocean Strategy and its application in Starbucks. It explains the principles and process of the theory, benefits and limitations, and evaluates its application in historical development context. The report also discusses the company background, historical development, and future development of Starbucks. It concludes with a summary and recommendation for the selected company.

Managing Innovation
Assessment

Table of Contents
INTRODUCTION ..........................................................................................................................1
MAIN BODY...................................................................................................................................1
Innovation theory- Blue Ocean Strategy................................................................................1
Company background.............................................................................................................4
Historical development...........................................................................................................5
Future development................................................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES ...............................................................................................................................8

INTRODUCTION
Innovation refers to the process of introducing new idea, workflows, methodologies,
products and services in an organisation. Innovation brings an improvement in an existing
products and services so that it can reach put to the maximum customers as possible and enhance
their experience(Thøgersen, 2021). The purpose of the innovation is to create value for a
business concern which provide revenue generating opportunities and improve productivity as
well. Therefore, by managing innovation, an organisation can discover the new products, reduce
costs and able to enhance the development process. The report will focus upon the theory is blue
ocean theory and discuss its principles and process. Further, It will explain the benefits and
limitations of the blue ocean theory and its application to the organisation. Moreover, it will
explain the background of the company and the historic development of the products and
services. It will also explain the future development of the products and services of the company
for creative ideas. Then, it will provide summary and recommendation of the report for the
selected company.
MAIN BODY
Innovation theory- Blue Ocean Strategy
Definition
The Blue Ocean Strategy refers to the strategy when there is no competition in the market
or is very less competition for the product of an organisation(Si, Kavadias, and Loch, 2022).
With this strategy, the company is able to create a viable business model and ensure profit from
the strategy.
Principles and process of theory
There are some principles of the Blue Ocean Strategy that assist the business organisation
to formulate and execute the strategy in minimising the risk and exploit new opportunities. The
principle are described as under: Reconstruction market boundaries: An organisation is required to explore for the new
opportunities that are beyond the practice and norms of the market for reconstruction of
the boundaries. It teaches the company to make competition irrelevant by looking other
conventional boundaries.
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 Focus on big pictures instead of numbers: This principles states that a leader is required
to break away from conventionality(Szostak, Laviolette, and Burger-Helmchen, 2021)
They are on conscious about searching of new opportunities and strive to find the best
ways by sticking to the rules that are commonly mentioned in red ocean strategy. Reach beyond exiting demand: The manager is needed to challenge the conventional
practice in order to create the greatest market for the new demand. This help in making
the fine segmentation and knowing the preference of the customers to meet their demand. Get the strategic sequence right: This strategy help in following the systematic
framework which includes the blueprint(Shaikh, and Randhawa, 2022.)(.. It is composed
of the four elements such as buyer utility, price, cost and adoption that are considered as
sequential steps.
 Overcome key organisation hurdles: There are many hurdles in adopting the blue ocean
strategy where a leader has to overcome the cognitive, resource, motivational and
political hurdles in order to be effective decision maker in spite of limited time and
resources.
 Build execution into strategy: The blue ocean strategy shows a need to build execution
in the strategy because it represent the departure from the situation. Therefore, a fair
process is required for strategy making and execution(Acharya, and et.,al, 2022). It
mobilises people for the voluntary cooperation that bis require to execute the blue ocean
strategy and deals with the risk of management that are associated with attitude and
behaviour of the people.
Blue Ocean Framework
The following framework are depicted as under:
Six path framework
This framework assist the organisation in guiding a way to look beyond the existing
market in order to get the potential for the new market. It teaches a business concern to think
about the creativity for the existing market with the purpose of determining new value to the
market(Bahl, Lahiri, and Mukherjee, 2021). It moves beyond the attitude in order to compete the
known value driers in the red ocean.
Following are the paths in order to examine are as follows:
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 Chain of buyers: An organisation is required to underrated the value proposition of te
buyers in order to meet their demands by reducing cost.
 Complimentary services and offerings: A business concern deliver services to
eliminate the complimentary value and create the a new market for the core products. Functional and emotional appeal: A research has showed that an individual purchase
for utility in order to meet or generate emotional response(Wehrle, and et.,al, 2022). A
change in the customers demand creates the new market.
Four action framework
This framework enables the organisation to look at the value and the cost drivers for the
offerings of a concern so that it can eliminate the unnecessary or inappropriate products. This
strategy help the organisation to develop the differentiated products in order to create the new
market. The four action know as ERRC Grid are depicted as under:
 Eliminate: An organisation is required to determine the aspects for value chain so that it
can eliminates cost an inefficiency by concentrating on value drivers.
 Reduce: The company look for the value proposition for the product and service and
identify those offering which are not necessary for the goals of the company(Sharmelly,
and Ray, 2021). Therefore, it help in identifying the cost drivers in the production
process which can be reduced.
 Raise: A leader identify the value drivers in the value chain for the company that is more
significant through the operational efficiency and product differentiation.
 Create: A leader always focuses on the differentiation through the process of innovation
of the product dan services and find new value proposition in the new
market(Kazemargi,and et.,al, 2022).
Evaluation of the theory(benefits and limitation)
Advantages
 Less competition: In the Blue ocean strategy, there is no worry about the competition as
it follows the differentiation strategy which no competition in the market. It mainly
focuses on the strategy which help in finding the unexploited market which increases the
chances of getting more customers for the company.
 Higher margin: As there is lack of competitor so an organisation can charge higher
prices for their products and enjoys in leading the market(Jiang, Ye, and Lin, 2021).
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When an organisation generate the new market or new demand for the existing products
so it can be able to charge the higher process because of the no competition in the market. Less stressful: Since there is no competition in the market so business concern has no
stress and are able to handle the market easily. The company is able to fulfil the demand
of the customers and provide products accordingly which enhances their experience.
Disadvantages
 Difficult to find: It is difficult to find the market where, there is absence of competition
at the time having the potential for the sale and profit margin of the products.
 Less success rate: In the blue ocean strategy there is less chances of success because
this strategy involves experiments with the products and the market. The company which
have enough resources strives to make experiments which are associated with the risk.
 Competition at later stage: When the company adopted the blue ocean strategy which is
successful so initially it will get no competitors but as the products and market becomes
big so the competitors enters into the market and an organisation loses the competition
advantage(Gasparin, and et.,al, 2021). Therefore, the company will not be able to enjoy
the pricing power and its profits will also get reduces.
Application of innovation theory in historical development context
Starbucks is considered as the highly competitive coffee shop business that has successful
created the uncontested market by changing the simple coffee drink experience into way of life
experience. This can be happen by adding the music, Wi-Fi, relaxed setting and luxurious
interior. Therefore, Starbucks has implemented the Blue Ocean Strategy to differentiate its
product from the competitors and by providing focus on developing Starbucks as a brand. The
company provides a good atmosphere to the customers and have a innovative value proposition
with the wide range of products such as coffee, teas, smoothies, frappuccino etc. It encourages its
customers to stay and chat by providing the facility of free Wi-Fi and allow to become a social
venue(Gurca, and et.,al, 2021). Starbucks is a premium quality brand which offers products at
high prices to the customers who are willing to pay for the luxurious and relaxed interior with
perfect environment. It also focuses on the quality of the customers services with an inner
purpose of maximum customers pleasure.
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Company background
In this report, Starbucks has been taken into considerations which is a multinational
company of US and largest coffee house chain in the world. The company has 33,833 store in
80 countries and provide wide range of products such as hot and cold drinks micro ground
instant coffee, whole bean coffee, caffe latte, frappuccino beverages etc. also provides seasonal
offerings to their stores and provide various facilities.
Starbucks Business model Canvas
 Customers segmentations: Starbucks has not segmented its customers and allow
everyone who wants to have high quality coffee and has mass market. Value proposition:
◦ Innovation: Starbucks brings innovative products for its customers.
◦ Quality: The company uses the high quality beans and trained roasters to provide
quality products.
◦ Convince: The company provides convenience to its customers to order the product
through app instead of standing at queue at stores.
◦ Variety: It provides variety of products such as sandwiches, pastries, coffees, tea,
smoothies, salad etc.
◦ Brand: It is a powerful and well known awarded brand.
 Channels: Starbucks uses the network for operated and licensed store for selling its
products and also uses the convenience stores, grocery stores, Starbucks cards, Starbucks
app and social media.
 Customers relationships: The employees of the company provides its best services to its
customers which make them more loyal.
 Revenue stream: It includes beverages and food that are available for sell in both
company operated or licensed stores and also includes royalties, packed goods etc.
 Key source: The company resource includes the human resources, high quality coffee
farmer centres, developer of products and stores.
 Key partners: It includes the suppliers worldwide, coffee producer, outside trading
companies, exporters, retailers and distributors.
 Cost structure: It includes the administrations and operation cost, market distribution
and other facilities.
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Historical development
Starbucks is a well known and brand that has created the highly loyal and delighted
customers by providing them unique experience which encourage them for repeat visit. The
company has adopted the Blue Ocean Strategy which provide suitable and relaxing environment.
The company has made the uncontested market which make the competition interrelate and
created and captured the new demand. An organisation has maintained a dominant position in the
coffee shop market despite of having the market of red ocean as various competitors has been
entered in the market such as cafe coffee day, Costa coffee, Duckin Donuts, McDonals etc.
Therefore, in order to remain in the competition and gain the competitive advantage the company
has created the value proposition for its customers(Salvador, and Pedersen, 2022). It has also
initiated the use of technology and social media platform and also introduces the mobile payment
application.
The organisation also implemented the product development strategies and enhances the
satisfaction level of the customers. It makes investment in creating and adding the more flavours
to the existing products, seasonal beverages like pumpkin spice latte in Halloween and also
added the new drink such as soda, new muffins and cakes etc. the purpose of the Starbucks is to
make the coffee the first sustainability sourced agriculture product in the world. This help the
organisation in increasing its sale and enhance profitability.
Blue ocean strategy help the organisation enhance value for the customers by making
innovation. As this this put emphasis on the value and innovation. Therefore, Starbucks is not
only redefine the value proposition which it provides to its existing customers but also required
to create new value proposition for the targeted segment. Following are the factors that can e
used be used by the company in order to make value and innovation:
 Buyers utility: It highlights the core values , utility for the products and services of the
Starbucks that are delivered to the customers.
 Price: The competitors provide the great competition in terms process by providing
products at the low prices to the customers .
 Cost: Starbucks uses the differentiation strategy and bring inputs at low cost which help
it in getting the higher profits and enhance the satisfaction level of the customer.
 Adoption: When an innovation is adopted by the company so it leads to the company
ahead and grow more.
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Application of Blue Ocean Strategy Canvas Grid (ERRC)
Eliminate Raise
It explains what factors Starbucks can
eliminate in order to remain in the market
which may includes managing of culture
issues, overall control of stores, provide in
house facilities and encourage the customers
who drink tea in other countries.
It enable the organisation to understand the
factors that are needed to be improved which
enhance value for the customers. The factors
include the queries of the customers that can be
improved by making them immediate response
and seeking out their feedback.
Reduce Create
An organisation is required to reduce the prices
of the coffee bean which help the company in
lowering the market cost and increase the
higher profitability.
An organisation can get the uncompetitive
advantage by adopting the differentiation
strategy that are not offered by the competitors.
This help the organisation in capturing the
market and influence the customers.
Future development
By making development an organisation can enhance the value added services in order to
maintain the long term relationship with the customers. In relation to Starbucks, an organisation
is required to make investment in innovation and technology and make use of social media
platform so that information can be provided to the customers. Starbucks can make future
development by bringing new products such as it can bring varieties of donuts like heart shape
donut, mint Oreo donut etc. or burger because these are most like by the customers in today’s
time. This help the organisation in capturing the new market and more customers(Sundbo, and
Fuglsang, 2022). The company also focusing on saving the environment therefore, it has
launched a Starbucks, partner waste and recycling app that assist in navigating the recycling the
guidelines and operated by the partner as a green stores innovation challenge. Starbucks makes
investment on the testing the new innovative ways in order to reduce the carbon footprint to
maintain the sustainability program. An organisation can bring organic food items which can
help the people in maintaining their good health as the customers are more conscious about their
health so they will prefer to buy the products which health and natural. Therefore, an
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organisation work towards in creating the more sustainable future for the planet and people. It is
constantly expanding its roster of the renewable energy and decarbonisation projects in the
United States. It also encourage for reducing the use of power and electricity and use renewable
resources.
Starbucks also bring new program for the Volvo cars to electrify the driving root and
provide a string of acquainted, trustworthy, clean and safe place to recharge these cars and their
battery powered vehicles. An organisation will provide these Volvo branded electric vehicle to
its 15 stores along with the 1350 mile roots that is powered by the charge point. Therefore,
Starbucks place a fast charger at their stores which is about 100 miles. When the cars of the
customers get recharged outside so the drivers can take rest inside with their Starbucks.
Therefore, Starbucks, by the end of 2030 lead the retail industry in decarbonisation solutions
which also include the electric vehicle charging and onsite solar availability at the stores and
various location(Kilimova, and et.,al, 2021). Therefore, expansion into other industries help the
company in increasing the sale and profitability of the business. This also help the company in
gaining the competitive advantage because there are many competitors such as Costa coffee, Mc
Café, Mc Donald, Café Coffee day etc. which provide higher competition to the corporation and
encourage the customers to switch fort the product of the company.
CONCLUSION
From the above discussion it has been concluded that managing innovation enable the
company to make faster introduction of the products and higher launch of the rate of success. It
also improve the deadline observation by the creative teams and provide greater monetary
efficiency. The report has discussed about the blue ocean strategy and it principle and process
such as reconstruction market boundaries, reach beyond exiting demand, overcome key
organisation hurdles etc. Further, the report has discussed the blue ocean strategy framework
which includes the six path framework and Four action framework known as ERRC Grid.
Moreover, it has discussed the advantages and disadvantages of the blue ocean strategy and
further, explained the application of innovation theory in historical development context. Then
the report has explained the background of the Starbucks and the historical development in
relation to the company. Apart from this, it has demonstrated the future development that can be
made by the organisation which help in gaining the market share and profitability as well.
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REFERENCES
Books and Journals
Thøgersen, D., 2021. Managing innovation on the public frontline: three approaches to
innovation leadership. International Journal of Public Sector Management.
Si, H., Kavadias, S. and Loch, C.H., 2022. Managing innovation portfolios: from project
selection to portfolio design. Available at SSRN.
Szostak, B., Laviolette, M. and Burger-Helmchen, T., 2021. Managing Innovation According to
Space, Time and Matter (No. hal-03583613).
Shaikh, I. and Randhawa, K., 2022. Managing the risks and motivations of technology managers
in open innovation: Bringing stakeholder-centric corporate governance into
focus. Technovation, 114, p.102437.
Acharya, and et.,al, 2022. Managing information for innovation using knowledge integration
capability: The role of boundary spanning objects. International Journal of Information
Management, 62, p.102438.
Bahl, M., Lahiri, S. and Mukherjee, D., 2021. Managing internationalization and innovation
tradeoffs in entrepreneurial firms: Evidence from transition economies. Journal of World
Business, 56(1), p.101150.
Wehrle, and et.,al, 2022. The impact of digitalization on the future of the PSM function
managing purchasing and innovation in new product development–Evidence from a
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Sharmelly, R. and Ray, P.K., 2021. Managing resource-constrained innovation in emerging
markets: Perspectives from a business model. Technology in Society, 65, p.101538.
Kazemargi,and et.,al, 2022. Managing open innovation within supply networks in mature
industries. European Journal of Innovation Management.
Jiang, S., Ye, F. and Lin, Q., 2021. Managing green innovation investment in a Co-opetitive
supply chain under capital constraint. Journal of Cleaner Production, 291, p.125254.
Gasparin, and et.,al, 2021. Business as unusual: A business model for social innovation. Journal
of Business Research, 125, pp.698-709.
Gurca, and et.,al, 2021. Managing the challenges of business-to-business open innovation in
complex projects: A multi-stage process model. Industrial Marketing Management, 94,
pp.202-215.
Salvador, E. and Pedersen, J.S. eds., 2022. Managing Cultural Festivals: Tradition and
Innovation in Europe. Routledge.
Sundbo, J. and Fuglsang, L., 2022. Managing Employee Empowerment and Engagement to
Foster Service Innovation. In The Palgrave Handbook of Service Management (pp. 595-
612). Palgrave Macmillan, Cham.
Kilimova, and et.,al, 2021. Managing the innovative development of the food industry. In BIO
Web of Conferences (Vol. 32). EDP Sciences.
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