Where Wendy’s Can Develop Blue Oceans In Beverage “Waves”

Hot Chocolate And Tea – Spaces To Be Owned
Ultimately, I recommend Blue Ocean products and/or services which lead to new lines of businesses and an increased revenue stream.  The hot chocolate niche is ripe for a well-resourced player like Wendy’s.  Although it’s a smaller space than coffee, critically, it is an area that a large player currently does not own.  They could realize a Blue Ocean in this space by developing a variety of high or mid-range quality hot chocolates with an assortment of flavors.  It would be much better in this smaller space rather than having just a tiny piece and no real profile in the large Red Ocean coffee space.  Also, tea is ripe in the U.S. – and is already trending up via smaller regional players throughout this country.  Both hot and iced tea are not yet “owned space” of a major restaurant chain.  Wendy’s could use its considerable resources to move to own this space.

Where To Go Next – And How?
Wendy’s should considerably modify its strategy for its coffee offerings – its mid-range and long term prospects blow in the wind of too many macro and competitive factors.  They should be occupying a beverage space that is less crowded, and that is “blue.”  If they look hard enough, they may even find Blue Ocean seas within the fast serve coffee space, but even so, they should gravitate to other beverages like hot chocolate and tea which are wide open nationally.  Then the next question for Wendy’s would be how to leverage its large resources to focus on garnering share from regional and local players.  Think Wal-Mart and small “Ma and Pa” stores in the ‘50s, ‘60s, and ‘70s – that’s enough to go on.  Always remember -  it’s so much better to be in a calm blue bay than a huge and turbulent red ocean.

Blue Ocean Wendy’s Red Ocean Hot Chocolate Tea Owned Space Turbo Tagger

Wendy’s New Coffee Offerings: Wading Into a Red Ocean Sea of Beverages

Move Into Coffee And Related Drinks
Wendy’s is currently test marketing specialized coffee drinks with a major new coffee program in Mississippi and iced-coffee in Phoenix, Pittsburgh and Kansas City, MO.  It has introduced a drink called “Frosty-Cino” in Mississippi which is a less thick, coffee-flavored version of a Frosty.  Unlike a Frosty, it can be drunk through a straw, and is offered in four different flavors.  It sells for $3.69 per 20-ounce serving.  This move into the coffee arena seems to be a reaction to a trend among fast-food chains placing more emphasis on beverages in light of Starbuck’s overall success.  McDonald’s is at the front end of this trend as it plans to add lattes, cappuccinos and other upscale coffee drinks to all U.S. locations by year-end.

Red Ocean Coffee Space
This fast-serve coffee space is now a Red Ocean, and has too many large and small players trying to entrench their positions.  This space’s market growth has slowed, and can not support the influx of companies offering additional supply.  Most players seem to be offering imitations of Starbuck’s beverages, and are trying to compete in the premium end of the space.  Wendy’s offerings are “me-too” line extension-like products.  If they really want to impact revenue via coffee beverages, they should try to occupy a corner or niche within this market.  I would suggest a donut shop emphasis on good, affordable basic coffee done well.

Seek To Own A Beverage Space
If Wendy’s heart is set on beverage revenue growth, that’s not a bad strategy because drinks typically have high margins.  It’s not a bad place “play.”  Wherever Wendy’s ultimately decides to place its bets, it should seek to own a beverage niche or space.  This will generate better brand equity, and offer a higher quality perception for its food items.  Thus, it will further develop synergic increases in revenue for all its other products.  It will also enable Wendy’s to charge higher relative rents for its beverages.  Critically, Wendy’s would be viewed by customers as a leader in the fast food industry.  This would clearly differentiate them in the crowded and competitive fast food industry, and allow them their own space in the market.

Wendy’s Red Ocean Sea Coffee Drinks Coffee Beverage Space Starbuck’s Turbo Tagger

Barnes & Noble: Go Beyond Books

Current Situation:
Barnes & Noble experienced a 15% drop in its fiscal 2nd quarter as sales slid 1.6% to $1.22 billion. Same-store sales declined 4.7%, and without the Harry Potter final installment last year it still would have declined 1.5%. These figures are symptomatic of the assaults retailers face on many fronts. The U.S. is in the midst of a weak economy and a significant economic downturn which is exacerbated by record high gas prices. As a result, consumers have a lot less disposable income, and more importantly, less confidence in their economic well-being. However, all was not gloom and doom for Barnes & Noble, as it did beat Wall Street expectations through lowering expenses – this led them to improve margins.

Choose Best Elements of Related Players and Occupy A Unique Space:
While this was a silver lining in their profit reduction, the health of the business must be focused on growth. Barnes & Noble must address the competitive pressures and forces facing their business. They must create a Blue Ocean line of businesses. They have the resources and current substantial brand equity to be known in the marketplace as an “intellectual entertainment” provider. This would offer the opportunity to create, develop, and brand customer and business service lines along related themes. They have the opportunity to occupy a space among Blockbuster, Netflix, Amazon, and Borders. Barnes & Noble can leverage elements of the best features and benefits of all these players to create an independent and unique space with a higher utility value proposition to consumers. They can also leverage their brick-and-mortar operations with a strategy that allows them to point online customers to their stores, and store customers to their website.

Flank Amazon with “Smart Entertainment” Spacing:
Barnes & Noble should also not look to compete head-on with Amazon.com as an “everything to everybody” online seller, but should choose an alternative theme with a strong appeal to a substantial niche of consumers. They should pick a fairly significant and lucrative arena of the market where Amazon’s presence recedes. To actualize gaining market share in this area, Barnes & Noble needs to provide features and benefits to consumers that Amazon does not provide or that utilize B&N’s physical locations. Barnes & Noble’s growth depends on realizing a broader vision and branding beyond books – it can own a place in the “smart entertainment” space, and “go beyond books.”

Barnes & Noble Blue Ocean Strategy Retailers Smart Entertainment Intellectual Entertainment Amazon Turbo Tagger