The document discusses the concept of exploring alternative industries to create new market spaces, emphasizing that companies compete not just within their own industry but also against substitutes and alternatives from different sectors. It highlights examples like NetJets and Nintendo Wii, illustrating how they appeal to specific consumer needs and preferences, thereby gaining market advantage. The emphasis is on understanding customers' alternatives and the strategic solutions provided by companies to address challenges in travel and entertainment.

1. Path 1:
Look Across Alternative Industries to create
uncontested market space

2. What is Path 1?
 A company has to realize that its customers are not
only taking their product or service into consideration
but also offers from other industries as alternatives to
fulfills their needs.
 A company competes not only with the other firms in
its own industry but also with companies in those
other industries that produce alternative products or
services

3. What Are Substitutes?
 A company competes with other firms in its own industry
 These goods or services have different forms
 But: they may have the same function or core utility
 Shift in price, change in model, ad campaign – all this can
elicit a tremendous response from rivals within an industry
Alternative industries usually don’t recognize these
changes

4. What Are Alternatives?
 A company competes with firms in other industries
who produce alternative products or services
 These goods or services have different forms and function and
core utility
 But: they have the same purpose
 Example:
 Restaurant vs. Cinema
function: enjoy the night out

5. NetJets – how it works
 Fractional jet ownership
 1/16 ownership to be shared with 15 others
 Each one has 50 hours of flight time per year
 Starting at $375,000 (plus pilot, maintenance, and
other monthly costs)

6. NetJets - Facts
 Purchased by Berkshire Hathaway in 1998
 In less than 20 years now larger than many airlines
 > 500 aircraft
 250,000 flights to more than 140 countries
 Revenue growth at 30-35 % p.a.

7. Looking across alternative industries
 Target group: Business travellers
Two choices:
1.) Business class/first class on a commercial airline
2.) Company’s own private jet

8. 1.) Why do corporations choose to use
commercial airlines for their corporate travel?
 avoids high investment
costs of a multimillion $
aircraft
 company purchases only
the number of corporate
airline tickets needed per
year
 lowering variable costs
 reducing possibility of
unused travel time
 long check-in and security
lines
 hectic flight transfers
 overnight stays
 congested airports

9. NetJet‘s solution
 NetJets avoids the enormous fixed costs
in contrary to commercial flights no need to cover
high fixed costs by filling huge aircrafts
 Jet is available with only 4 hours’ notice
if nothing is available NetJet will charter one
 NetJet reduces security issues

10. 2.) Why do people choose corporate jets
over commercial travel?
 dramatically cuts total time  multimillion-dollar price
 Reduces hassle
 allows point-to-point travel
 benefit of having more
productive and energized
executives
 dedicated flight
department is needed to
take care of scheduling
 deadhead costs
(costs of flying the aircraft
from its home base to
where needed)

11. NetJet‘s solution
 NetJet’s smaller airplanes, the use of smaller regional
airports and limited staff keep costs at a minimum
 5,500 airports across the USA in convenient locations
near business centres
 On international flights the plane pulls directly to the
customs office
 In-flight-convenience: favourite beverages, food, ...
ready

12. NetJet - Attributes
 Flexibility
 Shortened travel time
 Hassle-free travel experience
 Increase reliability
 Strategic pricing

13. Nintendo Wii – What it is
 Home video game console
 Wireles controller
 Handheld pointing device
 Can detect movements in 3 dimensions
 Connections to the internet for updates

14. Nintendo Wii - Facts
 2001: Was conceived after „flop“ of Nintendo Game
Cube
 2005: Prototype of the controller was revealed at Tokyo
Games Show
 2008: Wii leads the generation over the playstation 3
and xBox 360 in worldwide sales
Market leader

15. Looking across alternative industries
 Target group: Broader demographic than Sony and
Microsoft
Two choices:
1.) Going out for bowling
Families, older people
2.) Staying at home and play a console game
Kids and teenagers

16. Nintendo Wii – Key factors
 Movie playing
 Price (~
 Grafics
 Physics
 Fun
 Game Library
 Magic wand

17. Nintendo Wii - Solution
 Nearly every demographic group as target market

18. Satoru Iwata (Nintendo president)
„We‘re not thinking about fighting Sony, but about
how many people we can get to play games.
The thing we are thinking about most, is not portable
systems, consoles and so forth, but that we want to get
new people playing games“

19. Individual consumers and buyers ponder
intuitively
Seller shouldn’t abandon this thinking