Blue Ocean

Strategy Adopted:

Our base strategy was to target the low-cost market segment (6-21 yrs), by employing a price reduction tactic. This was primarily for the short-term: 3 years. Our background strategy was to invest in acquisitions and R&D to improve the product build quality, with the intent to target the top 2 market segments (who preferred a feature rich product) in year 3.

We reduced the price to 299 USD to match the pricepoint offered by the closest competitor in the 6-21 market. Investments were made in projects to reduce operational and production costs. We also invested in acquiring an R&D firm and added features to the existing product in every year, making it better than the low cost offering (Yellow), and almost close to the premium player (Shiny).

As a result of our low-cost strategy, our segmentation strategy was to push for expansion in the low-cost stores and reduce efforts around video game and specialized electronic stores.

We also did not invest in geographic expansion strategies in years 1 and 3.

Outcomes:

Sacrificed margins as a result of price reduction and increase in product features. Offset this in year 2 through low cost manufacturing investment. This resulted in a drop in revenues and EBIT YOY. Key outcome was that in Year 1, SPI was maintained at the same level as the previous year, and the market share in the 6-21 segement doubled in quantity and value. Most of this share was captured from the Yellow market share.