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Blue ocean strategy
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Blue Ocean Strategy
Presented by: Warda Ikram Izaz Ali
M. Zeeshan Khattak Behram Khan
Introduction
Business universe consists of:
1. Red Oceans
2. Blue Oceans
RED OCEAN
• All industries in existence today• Known market place• Competition• Companies try to gain a bigger market share• Crowded industries, profits and growth
reduces
BLUE OCEAN
• All industries not in existence• Unknown market place• No competition• Demand is created, not fought over• Two ways to create blue oceans:1. Completely new industries2. Created from with a red ocean
Red Oceans are greatly influenced by Military Strategy
• Attacking• Competing • Winning• Capturing
Toward blue ocean strategy:Blue oceans are not about technology innovation.
Although technology is sometime involves in creation of blue oceans strategies but it is not key
feature of technology.Advanced Technology is used in those industries,
where it is intensive.Exhibit shows that among three representative
industries blue oceans seldom result technology innovation b/c they have certain technology
already.
Cont’d
• Ford’s revolutionary assembly line can be traced back to meat packing in USA.
• Similarly, in computer industries blue oceans did not only come from innovation in technology but by technology which is valued by buyers.
Michael Ford
Incumbents create Blue oceans
• The established old player usually create blue oceans in their core businesses.
• For instance GM Japanese automaker & Chrysler were establish player during creation of blue ocean.
• In cinema industry place theaters and ACM create blue oceans.
• Ford, apple & dell (new entrants)• Nickelodeon (established player)
Cont’d
• Two useful things for incumbents..1. No disadvantage in creating new market.2. Incumbents usually use blue oceans their
core businesses.
Blue Ocean Strategy
New entrant 4incumbent 9
existing technologynew tech-nology
Driven by new/existing tech-nology
Both existing/new Technology
attractive or unattractive industry
attractive
unattractive
non existent
Company & industry are wrong units of analysis
• Traditional units of strategic analysis(company & industry) have little explanatory power when it comes to analyzing how & why blue oceans are created.
• There is no consistently excellent company b/c same company can be brilliant at one & wrong at other time.
• Likewise there is no excellent industry. relative attractiveness is driven by creation of blue oceans.
Cont’d
• The most appropriate unit of analysis for explaining the creation of blue oceans is the strategic move.
• Strategic move is the set of managerial actions and decisions involved in making a major market creating business offering. for example
• Compaq. People considered it to unsuccessful b/c in 2001 It was acquired by HP & cease to be a company.
• But Compaq does not invalidate the smart strategic move because it create multibillion dollar market in PC servers.
Creating blue oceans builds brands
• Blue oceans strategy is so powerful that BO strategy move create brand equity which exists for decades.
• Henry ford‘s assembly line in 1908, but company’s brand still benefits form that Blue oceans move.
• IBM is also regarded as US institution for its blue oceans strategy it created in computer. e.g 360 series
Cont’d
• The findings from blue oceans strategy encouraging the executives of large established corporations that are victims of market space creation.
• Large R&D is not key to create new market space but the key is making right strategic move.
• Any company that understand what drives a good strategic move will be well placed to create multiple blue oceans over time.
The End…………
Blue Ocean Features
Never Use Competition as
Benchmark
Reject the conventional strategy
Create uncontested market place
Product differentiations VS Low Cost
Cirque du soleil – differentiation and Low cost
Whole system approach – utility and price, cost structure.
Re-constrionist view vs. traditional competitive strategy
Red Ocean
Competing in existing market
Beat the competition
Exploit existing market
Make the value/cost trade off
Align the whole system of a company’s activities with its strategic choice of
differentiation or low cost
Blue Ocean
Create uncontested market
Make the competition irrelevant
Create and capture new demand
Break the value/cost trade off
Align the whole system of a company’s activities in pursuit of differentiation and
low cost
Barriers to Imitation
• Creating a blue ocean strategy is not a static achievement but a dynamic process
• As the company and early imitators succeed and expand the blue ocean more companies eventually jump in.
Barriers to Imitation
A blue ocean brings barriers to imitation; some being operation and others cognitive.
• A value innovative move does not make sense based on conventional strategic logic– EX: CNN
• Brand image conflict prevents companies from imitating a blue ocean strategy. – EX: The Body Shop
Barriers To Imitation
• Natural monopoly blocks imitation when the size of a market cannot support another player– EX: Megaplex in Brussels
• Patents or legal permits block imitation
Barriers to Imitation
• Cost Advantages: High volume by value innovation– Ex: Apple ‘i’ products helped discourage imitation
for awhile
• Network externalities: the more customers, the more attractive a company looks– Ex: ebay – many buyers/sellers; hard to get them
to move to a potential imitator
Barriers to Imitation
• Politics and Culture: Imitation often requires companies to make changes to existing business practices and culture– Ex: Southwest (offers speed of travel with cost/flex. of
driving)– Would mean major revisions in routing, training,
marketing, and pricing• Brand Buzz: High leap in value leads to loyal
followers– Ex: Apple products (“I’m a Mac” campaign)