Assignment 2 Old Data

7/27/2019 Assignment 2 Old Data

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MODULE TITLE: Strategic Management

PROGRAMME: MBA

Assignment Title:

Business organizations have long engaged in direct competition in search of sustained and

profitable growth using a variety of tried and tested strategies. Yet in today’s overcrowdedindustries, head-on competition results in nothing more than a “bloody red ocean” of rivals

fighting over a shrinking profit pool. (Chan Kim and Mauborgne, 2006, Blue Ocean, HBS

Press).

Critically evaluate this statement drawing on prescriptive models of strategy and blue oceanconcepts. Use business examples to illustrate your answer.

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ABSTRACT

Blue ocean strategy is the core of all the discussions in the present assignment and it will be

discussed that how it is being implemented by Toyota. Value innovation is the base of blue

ocean strategy where an organization rather than focusing on competitive advantage try to createdemand for its products in those markets which are still untapped. Normally firms get

competitive edge over their rivals by either targeting price element of product mix or by

producing differentiated products, however, in value innovation both the strategies areimplemented jointly by the business organizations. There is a variety of vehicles that “Toyota

Corporation Japan” is manufacturing to meet the requirements of its customers all over the world

and organization is famous being leader because of its innovations like mass-market hybrids.Toyota is being analyzed with reference to its blue ocean strategy.

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Contents

1. Introduction....................................................................................................................1

1.1 About Blue Ocean Strategy...........................................................................................1

1.2 What is Blue Ocean Strategy?.......................................................................................1

2. Company profile............................................................................................................23. Review of topic related literature...................................................................................2

3.1 What caused the Blue Ocean Craze and how deep is the water....................................2

3.2 What is Strategy?...........................................................................................................33.3 Historical Background and Literature Review..............................................................4

3.3.1 General concepts............................................................................................................4

4. Strategy analysis............................................................................................................54.1 Blue Ocean Strategy Tools, Frameworks and Methodologies.......................................5

4.1.1 Value Innovation............................................................................................................5

4.1.2 Red Ocean Vs Blue Ocean.............................................................................................6

4.1.3 Strategy Canvas.............................................................................................................7

4.1.4 4 Actions Framework.....................................................................................................74.1.5 ERRC Grid.....................................................................................................................8

4.1.6 Pioneer-Migrator-Settler Map........................................................................................94.1.7 Buyer Experience Cycle / Buyer Utility Map .............................................................10

4.1.8 3 Tiers of Non customers.............................................................................................11

4.1.9 Sequence of Blue Ocean Strategy ...............................................................................124.1.10 4 Hurdles to Execution.................................................................................................12

4.1.11 Three Principles of Fair Process..................................................................................14

4.1.12 Conventional Wisdom vs. Tipping Point Leadership..................................................145. Strategy implementation..............................................................................................16

5.1 Ask their self................................................................................................................16

5.2 Blue Ocean Strategy by Toyota Corporation...............................................................165.2.1 Red Ocean Vs Blue Ocean...........................................................................................165.2.1.1 Red Ocean (other service provider).............................................................................16

5.2.1.2 Blue Ocean (Toyota)....................................................................................................17

5.2.2 Four Action Frameworks.............................................................................................175.2.3 Value Innovation..........................................................................................................18

5.2.4 4 Hurdles to Execution as per BOS.............................................................................18

6. Conclusion...................................................................................................................19References...................................................................................................................................20

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1. Introduction

1.1 About Blue Ocean Strategy

In order to retain the existing share in the market so get maximum amount of profits with

stability and to capture more and more from the competitors organizations are facing greatamount of competition.

All this competition leads to high cost of production to differentiate products and services andhigh cost of distribution and marketing which results a great decline in the profitability of

organizations and cause nothing else a “red ocean”. W. Chan Kim and Renée Mauborgne wrote a

book that challenge different strategies to get success and found that most of the firms which are

in competition within a red ocean are putting their sustainable growth and profitability under great doubts (Kim and Mauborgne, 2010)

Kim and Mauborgne conducted a research on 150 strategies and changes their in with reference

to 30 industries and disagree to the fact that organizations in future will not get success until

these will remain within the red ocean competing each other rather these need to create blueoceans where there is no competition. These firms need to create demand for their unique products with the help value innovation concept which will help them coming out of Red Ocean

and sailing in the smooth blue ocean with sustain profitability and growth as explained by Kim,

Chan (2005).

There is no concept of competition for organizations that are using Blue Ocean Strategy. A

model with proved strategies to create and capture Blue Ocean was presented by Kim andMauborgne where they describe this process analytically. In order to design and apply these Blue

Ocean strategies with great amount of success, there are six principles that are being devised

after evaluation of different strategies used with in an industry. These six principles include

method of reconstructing borders of market, emphasis on the big picture, target not only thecurrent demand but as well as upcoming demand, make a strategic alignment, try to minimize the

obstacles, and construct implementation plan for strategy. (Harvard Business Review, 2004)

Blue Ocean provides a completely new way of doing the business and getting success as

compared to traditional strategies of doing the business.

1.2 What is Blue Ocean Strategy?

There are 150 changes in strategies that are being studied to compose BOS and research

comprise on the strategies used in 30 industries for a period of more than 100 years. Product differentiation strategy and cost leadership strategies are applied at the same time

under BOS.

The mere focus of BOS is not only to overcome competition that exist in the industry but

to create demand for comparatively differentiated goods and services at low cost, so insuch situations there is no question of any kind of competition.

In order to innovate something business organizations key on try again and again to form

best products that can meet customers’ demands. According to BOS these products are

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made systematically and methods and techniques can re-generate, so in this way these

strategies are equally important from new entrants as well as those business units that

exist already in the market.

Value curve, buyer utility map, six paths, buyer experience cycle, four actions

framework, strategy canvas and blue ocean idea index are major components of BOS

network and its techniques. All these techniques and models not only help in constructing overall strategy of the

organization but these also help in implementation of these strategies as these could be

easily communicated.

Formulating and executing strategies are major parts of BOS.

Value innovation, tipping point leadership and reasonable procedure are three major

ingredients of BOS concept.

2. Company profile

A variety has been given in the vehicle industry by Toyota. Toyota is famous because of itsinnovation and strategies in connection of new and unique management concepts and famousorganization in the vehicle industry is producing such a high value products. (www.toyota-

global.com)

Sakichi Toyoda is the founder of Toyota Motor Corporation which was founded by him in 1937

after the sale of 2 millionth Prius hybrid (www.toyota-global.com).

3. Review of topic related literature

3.1 What caused the Blue Ocean Craze and how deep is the water

Blue Ocean Strategy is becoming popular day by day as it is completely a new concept of doing

business (Kim & Mauborgne, 2005). According to the point of view of Kim and Mauborgne

oceans are divided into two groups one is red and other is blue. In case of red oceans, there is

minimum level of profits that firms could earn and in some situation it does not exist, moreover,everyone tries to retain its existing share and tries to maximize it by capturing others. However,

in case of Blue Oceans, market is not that developed and there is no competition as the

companies target those markets which are still to be served with their creative and innovative products and services, this impact positively on the profitability of the organization. Every

researcher claim that his new idea will help in resolving present issue, however, the point is thatwhether this new idea or solution is based on any concrete theory or concept. Literature relatedto the studies on management is not that clear as it is biased with reference to appearance of

different approaches. This result a great damage for old researchers who had presented great

work in the past, moreover, this impact negatively on the readers as well who have gone through

latest researches and ignored the old one which were more significant (Rucci , 1998, p. 8)

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http://www.toyota-global.com/








In this present assignment the main this that is questionable is the concreteness of the idea of

blue ocean that whether it is a completely new concept and does not have any theoretical support

from the management literature or the idea is old and remain under discussion but differentmanagement scholars. However, answer to this particular question is no, as this Blue Ocean

strategy is an old one. Moreover, this strategy will remain suitable depending on the situation

and circumstances in which it is used.

3.2 What is Strategy?

Most important is to define a strategy before we go further to analyze Blue Ocean Strategy.

There are various kinds of decisions that an organization need to take like what should be thenature of business is a type of “strategic decisions” (Ansoff, 1988), same kind of question was

being asked by Drucker, “What is our business and what should it be?” (Drucker, 1977)

According to Porter strategy is all about designing a framework that could help business ingetting competitive advantage, deciding targets and rules and procedures to accomplish those

targets (1980, p. xvi) Moreover, according to Porter, strategy provide as strength to fight against

the competitive powers or in placing the organization at the strongest position in the industry(Porter, 2008, p. 89).

Setting up standards for the performance in the long run, deciding on the mission of an

organization and the way it would be achieved with the help of available or availed resources and

their proper allocation is known as strategy as per the ideas of Chandler (Rumelt, 1986, p. 10).

While formulating the strategy for any organization, strategic decision makers’ focus thatorganization could remain competitive throughout and for this organization may reduce the

number of advantages that it could get presently (Day, 1997, p. 48).

According to the views of McCarthy (2000, p. 35), the way that an organization should select isits strategy. Looking at the possible and required future state of any organization is the essenceof all the definitions provided above. After going through various views of the researchers about

strategy, there is a need to research business strategies from historical perspective. It is more than

a strategy that researchers and scholars are studying various business studies. There are manyresearchers who were at the view that organization should highlight the possible threats and

opportunities from their external environment and strengths and weakness from the internal

environment, in order to be competitive for a long period of time and researches on this idea startfrom 1960’s, moreover, it should be analyzed that how these could help in selecting a business

strategy (Barney, 1991, p. 99). According to the old researches, organizations will have similar

kind of resources in the long run and in case of introduction of a new one it will be adopted as

organizations are working in competitive environment. However, according to the newresearches rather than having similar kind of resources in order to be competitive, organizations

should focus on having distinct resource that give a completely new opportunity or a threat that

has never been observed before (Barney, 1991). No doubt there are many researches that are onthe issue of bringing stability in the business with the help of strategies as noted by Mintzberg et

al. (1998), however, there are many as well that present strategy as a major source of bring

change in the organization. Since last 50 years business researchers had provided many strategictools and techniques like five-force model of Porter, hyper competition, SWOT analysis, value

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chains, hyper competition and core competencies (Hambrick & Fredrickson, 2005, p. 51).

Organizations should take assistance of all the frameworks presented to design their own strategy

for doing business.

Rather than having a reactive approach, it is better to be proactive by targeting the strategies of

competitors as suggested by Sun Tzu before 2400 years (Hanzhang, 2000). The ideas presented by Sun Tzu were applicable to that business environment when these were presented by these are

equally implementable on present business environment. However, still there is a need toresearch further new ideas and strategies to run business as the competition at the global level

increasing day by day and researchers like Kim and Mauborgne get the support from this concept

and they work on designing new frameworks to provide solution of issues and problems of present day business world.

Managers, being representative of shareholders in any organizations have great concerns about

the future of any organization; moreover, it is necessary for them as well to retain their own jobs.

It is for that reason they keep on trying new and related ideas of management to improve their

business strategies.

3.3 Historical Background and Literature Review

3.3.1 General concepts

Recombining and reconstructing are the two main concepts that have influence on and aresignificant part of Blue Ocean Strategy. In order to get maximum share from the market,

organizations may recombine their strategies and may find a new and better way to gain

competitive advantage by either differentiating their products and services or by either becoming

cost leaders or developing more demand for its products and services. Second option thatorganization may utilize to maximize return on capital is to focus on the supply of its products

and services by recombining the present strategic ideas regarding product formulation anddistribution, this will require firm to be innovative and creative so to offer new unique products

to either same customer groups or organization may target new segments of the market.

Structural concepts of strategy are based on recombining a completely new strategy and this

point of view is known as structure-conduct-performance (SCP). According to the SCP,organization will consider the present structure of the market that may depend on the equilibrium

of the market caused by supply and demand forces which further influence the price setting in

the market and impact on monetary and operational performance of the organization.Furthermore, it can be said that according to this point of view organizations observe the changes

in market structure and adjust their strategies rather to take competitive advantage or to bedefensive. Contrary to the recombining approach, strategists having reconstruction point of viewabout designing business strategies focus extending or contracting the present boundaries of the

market without taking into account the available structure of market that whether it is perfectly

competitive or not, they believe in creating demand for the products and services of organizations by increasing their value to the customers. Markets are interconnected and

associated with each other either directly or indirectly according to the views of Day (1997) who

think that there are no boundaries that could separate a market from the other. Bresser, Hitt,

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Nixon and Hueskel write, “Deconstruction of the proprietary business arrangements has changed

the boundaries that define markets and industries leading to a radically new competitive and

scope. It is changing the concept of firm strategy along with the strategic options available tofirms” (Bresser et al., 2000). According to this point of view organizations should focus on

increasing the demand for their products and services. Resource based view is a main component

of reconstruction school of thought.

Is that the sources of any organization that could make it either strong or weak (Wernerfelt,1984, p. 172)? According to the resource based view different organizations have their own

distinct sources that are not homogenous (Peteraf, 1993). The idea of value chain was firstly

presented by Porter (1985) and researchers who had presented resource based theory consider that their theory is developed on the basis of major concepts of value chain (Barney, 1991).

Instead of focusing on the position of the product in the market organization should consider that

major resource which could help it in getting competitive advantage in the market (Gurau, 2007,

p.372).

4. Strategy analysis

4.1 Blue Ocean Strategy Tools, Frameworks and Methodologies

Blue Ocean Strategies are all about creating new markets for an organization which arecompetition free, in contrast to the Red Ocean Approach. Most of the parts of Blue Ocean

Strategies are unconscious, however, strategists providing these strategies solve this issue by

designing frameworks to construct Blue Oceans and their approach is very technical and based

on analysis (Kim, Chan 2005).

4.1.1 Value Innovation

Eliminate Costs

------> VI Value InnovationReduce Value

The most significant part of Blue Ocean Strategies is the concept of value innovation, which help

organization to product those goods are services which are completely different in market and

are comparatively available at low prices. Value innovation concept is equally beneficial for the

organizations using it as well as customers of these organizations; moreover, it provides a

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competition free environment to business organizations. Organizations consider that their

customer should remain in surplus that means the utility they are deriving from the products and

services of the organization should always be greater that the value or utility of their money.(Kim and Mauborgne, 2010)

Followings are the four major questions that need to be answered by the managers using BlueOcean strategy and they get help from Four Actions Framework and ERRC grid, it make them

able to break the value-cost exchange.

What are the factors that industry has to eliminate?

What are the factors which are not according the requirements of industry?

What are the factors that could be improved?

What are the factors that could be new to the industry and not yet introduced?

4.1.2 Red Ocean Vs Blue Ocean

Read Ocean Strategy Blue Ocean Strategy

Does not create new markets and justfocus on competition within present

market.

Provide a competition free environment.

Emphasis on getting competitive edge No concept of competition

Focus on meeting present demand Focus on creating demand

Create the value-cost tradeoff Break the value-cost tradeoff

A firm may either align with the product

differentiation strategy entirely or it may

lead being a cost leader.

A combination of differentiation and low

cost is used by the organization.

4.1.3 Strategy Canvas

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All the factors that could help an organization in developing a Blue Ocean Strategy and the

actions it should take in this regard are presented in shape of strategy canvas. Where on the x-

axis there are various factors on the basis of which organization could compete in the market andareas which organization should focus and make investments, however, on the y-axis are

different level of offers that customers of an organization could enjoy due to the range of

competing factors (Kim & Mauborgne, 2005).

There are two purposes behind strategy canvas:

First, it provides the very base to the organization to compete in the present market as it

provides information about all those factors on the basis of which organization couldcompete in the market.

Second significant purpose that it meet is diverting the focus on organization fromcompetition to the opportunities that are not taken up by any one yet and to the new

customers of the organization.

A significant part of strategy canvas is the value curve. Organization could observe it

performance with reference to different competing factors within any industry with the help of strategy canvas.

4.1.4 4 Actions Framework

Reduce: What are the factors which are not according the requirements of industry and need to be

reduced? ======================

A

NewValueCurve

Eliminate: What are the factors that industry has to eliminate? ================

Create: What are the factors that could be new to the industry and not yet introduced?

===============================

Raised: What are the factors that could be improved? =====================

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In order to design a new curve indicating the value for the customers, organizations need to use

Four Actions Framework as discussed in the above table. There are four questions that an

organization needs to answer to design a new strategy to create value in its products and serviceswith a combination of differentiation and cost leadership strategies.

4.1.5 ERRC Grid

Eliminate: Reduce:

What are the factors in the industry on

which most of companies are competing

and need to be eliminated?

What are the factors that are needed to be

reduced considering their low standard?

Raise: Create:

What are factors or areas that could be

improved?

What are the new factors that are not yet

focused and introduced by anyone else?

Four Actions Framework is interlinked with the Eliminate-Reduce-Raise-Create Grid (ERRC). It

does not only help the organization in answering the four questions being asked in Four ActionsFramework but also help in creating a completely new value curve with the help of that answers

and creating a blue ocean being a competition free zone. There are four advantages that

organization can avail immediately with the help of this grid: (Andersen and Strandskov, 2008)

Organization become able to break the value-cost trade off with the help of a combination

of product differentiation and lost leadership strategies.

It highlights those organizations which are just focusing on creating and raising the value

of their products but not considering the raising cost.

All the managerial level staff can easily understand this grid and can play a great role inthe application of this grid.

Organization is in a position to know all those factors on the basis of which all other

organizations in the industry are completing which completing the grid.

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4.1.6 Pioneer-Migrator-Settler Map

Organizations that are striving hard to grow rapidly and to increase their profitability can getassistance of pioneer-migrator-settler (PMS) map in achieving these objectives by plotting their

present and upcoming portfolios on it. Me-too businesses are the very bases to define the settlers

that are necessary to plot these portfolios, offers that are competing in the market can beregarded as migrators and pioneers are the offers that can provide exceptional returns. These can

help in creating blue oceans for the organization and in accomplishing the objectives like

maximization of profits and rapid steady growth (Andersen and Strandskov, 2008)

In a situation where the present portfolio and upcoming offers of an organization are based onsettlers entirely, the growth curve of the organization will have a declining trend. All this means

that organization is in severe competition and still lies in Red Ocean, so there is a need to pull itout and push it towards the Blue Ocean. May be presently settlers provide organization good

business opportunities but in the future if organization continue to remain within its red ocean

this will cause great harms to its profitability because of intense competition in the market.

(Banyte, and Salickaite, 2008)

Organization can expect normal growth in situations where present and upcoming offers are

merely based on migrators. However, organization is still not at the point where it is utilizing allits resources and providing the best, organizations that believe in value innovation has

comparatively less risk. As much settlers organization have as much will be chances for valueinnovation that will further lead to Blue Ocean.

The managers who have a proactive approach towards there business can have many advantages

from these type of business strategies. In order to evaluate the present performance of any

organization, there are certain parameters like profits, revenues, share in market and satisfactionof customers which can be used as standard for analysis. However, traditionally managers

believe that all these parameters are not the very base for measuring the performance of an

organization as the pace of changes in the external environment of the organization is so great.Moreover, it was explained about the present market share that it is reward of some activities

done in the past.

It is suggested to the organization that these should rather go for the pioneers instead of

upcoming business offerings as this will increase their profitability and growth (Andersen and

Strandskov, 2008).

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4.1.7 Buyer Experience Cycle / Buyer Utility Map

The managers could understand the point of customers very easily with the help of buyer utilitymap. It highlights different levels of satisfaction that customers are getting after the use of

different products and services produce by the organization thus provides an understanding about

all those forces that can increase the level of satisfaction of customers. Managers are able tounderstand the point of view of customers with reference to different offerings of organization

and they level of satisfaction attach with those offerings.

Buyer Experience Cycle can he divided into six different levels. There is a sequence that existsamong these different six levels that starts from purchase and ends at dumping. At different

levels of this cycle there are various kinds of experiences that customers could have from a given product or services. For instance, in order to purchase a product a customer may visit web site of

the company or general web sites like Amazon.com (Kim and Mauborgne, 2010)

Six Utility Levers are different forces that are applied by the organization to provide utility to itscustomers with the help of their goods and services at different levels of Buyer Experience

Cycle. It is normal to use these levers. For instance, organizations give a message to their users

of products that it is very easy to use their products so it is very obvious lever. There are manyorganizations which are working on the lever of productivity of a customer. This require

organizations to research on customer needs and demands and in the end make such productsthat could satisfy these needs and wants with creativity and innovation (Bharadwaj, and Menon,2000).

Organizations can have great benefits from creativity and innovation that provide organization

with goods and services that are produced on the bases of a completely new idea to attract moreand more customers towards the organization. It is found that managers try to provide maximum

at a same stage but this is a useful methodology in case the business is still developing. However,

the organizations that are present in the industry since long, strategies like this cannot take theorganization towards a Blue Ocean. (Andersen, and Strandskov, 2008)

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4.1.8 3 Tiers of Non customers

First Tier: "Soon-to-be” are the individuals who are not using the products and services of your organization but are likely to join these soon.

Second Tier: "Refusing" are those non-users of your product whose intentional selection isopposite to your market.

Third Tier: "Unexplored" are those non-users who are far away from your products and services.

Organizations try to retain the present market share and want to expand this with the help of different strategies. For this purpose, organizations may try to purify their selected segments of

the market or may make speedy and effective adjustments to the products and services to makethem fit with the requirements of the customers. It is very difficult to make such changes in the

products in a situation when competition is so high in the market. Purifying selected segment

may cause loss of customers and this may create risk for the business. (Andersen, and

Strandskov, 2008)

Organizations need to change the direction of their strategies in order to increase the width and

depth of their blue oceans. Rather than just focusing on those who are currently using the products and services of organization, there is a need to focus on those who are not using these.

Rather than focusing that what are likings and disliking of different customers, organizationsshould go for the similarities. All these activities will help the organization in increasing thedemand of their products and services.

There is no doubt that in most of the situations the size of Blue Ocean consist of those

individuals who are not using the products of organization, is very large but there are only someorganizations who successfully understand their blue oceans and targeting their needs.

Organizations need to understand the needs and desires of these non-users very carefully so that

expected demand for the products of organization could become the real demand and to havenew customers for the organization.

Non-users of organizations’ products and services can be divided intro three tires and these arelocated at different distances from the present market of the organization. As discussed above

those customers who lie in the very first tie are almost ready to enter your market. They are may

be purchasing a very little quantity of the products of organization.

In the second tier non-users of the organization are bit far from the offers that organization have

made, they are just using the products of your organization to meet their needs but are notsatisfied from that products and services and their opinion is against them.

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In the third tier, non-users of your products are far way and they never ever tried your products,

however, organization should analyze that which goods and services these customers aretargeting and how that features could be integrated in the organizations’ products to increase the

volume of their market. (Boguslauskas, and Kvedaraviciene, 2009)

4.1.9 Sequence of Blue Ocean Strategy

Utility, price, cost, and acceptance should be the steps that would lead a company towards the

Blue Ocean Strategy. (Brassard, et al, 2002)

Does your offering unlock

exceptional utility? Is there a

compelling reason for the mass of

people to buy it?

BUYER UTILITY

Is there exceptional buyer utility?

YES NO

4.1.10 4 Hurdles to Execution

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Resource Hurdle

Limited resources

Cognitive Hurdle

An organization wedded

to the status quo

Motivational Hurdle

Un-motivational staff

Political Hurdle

Opposition from

powerful vested interests

After designing the Blue Ocean Strategy, in accordance with the framework of profitable business organization should implement these strategies. However, it could be a challenging task

for the organization, it is because of the reasons that everyone working in any organization has

different thinking style that further leads to right implementation or wrong implementation either it is red ocean or blue.

There are four main obstacles which are discussed as under:

A cognitive hurdle. The way of thinking of individuals can also proved to be hurdle in

implementation of blue ocean strategies as they are used to their respective red oceans.

Limited resources. As much the organization want to change its present strategy as

much there will be the need of resources, however, it is found most often that these

resources are scarce.

Motivation. Motivation plays a key role in making people understand the advantagesthey could have utilizing blue ocean strategies.

Politics. It is also a big hurdle; many positive decisions in the organization may not get

application due to it.

There are many organizations who have to face these obstacles discuss about in implementation

of their key decisions but successful organizations are those who know how to handle theseobstacles. (Bruce, and Birchall, 2009)

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Followings are the answers of some major questions by tipping point leaders: What are elements

that could help in breaking the status quo? How organization can attain maximum amount of resources? How to motivate individuals that they easily adjust and help in a change process?

How to pull down politics in the organization? By simply answering these questions, tipping

point leaders can easily implement blue ocean strategies in their organizations rapidly and in amanner that would prove cost effective for the organization (Bruce, and Birchall, 2009)

4.1.11 Three Principles of Fair Process

A fair process can be defined on the basis of three major factors that are interconnected witheach other and include engagement, explanation and clarity of expectation. It is necessary for all

the workers of an organization to understand all these three factors which are often named as

three E principles. (Hansen, and Birkinshaw, 2007)

1. Engagement

2. Explanation

3. Expectation Clarity

4.1.12 Conventional Wisdom vs. Tipping Point Leadership

Conventional Wisdom: Transforming the map is the base for bring change in any organizationand this require large amount of resources that are available for longer periods of time. (Johnson,

et al., 2005)

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Mass of Employees

Company

Tipping point leadership: In order to make a strategic change in a cost effective manner, theyfocus on factors that may have disproportionate influence.

Disproportionate Disproportionate

Influence factors Influence factors

___________________________________________________________________

Company

Traditional theories of organizational change are based on the idea that it is a mass level

transformation. So, in order to bring the change according to those theories organizations requirelarge amount of resources and time to bring change. However, in case of tipping point

leadership, point of view is completely change, they target all those elements which could help in

bring the change including people, acts and activities at relatively low cost but with great speed.(Loewe, and Dominiquini, 2006)

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5. Strategy implementation

5.1 Ask their self

Followings are the questions that need to be answered for the implementation of strategies:

How intense competition Toyota Motor Corporation is facing locally and internationally?

What are the suggestions of sales personals about the discounting policy of the

organization to increase the sales?

To what extend organization need to increase its investments in advertising the products

of organization?

To what extend Toyota is sacrificing development, innovation and creation of new brandsfor the sale of reduction in cost, to control the quality and to manage the brand?

Whether Toyota is considering options like outsourcing its operations to those parts of

the world where cost is not that high or organizations that could produce these atrelatively less price?

Is the organization only believed in mergers for further development and growth? How easily organization could get the financial resources to respond against the strategic

move of competitors?

Once all these questions are answered, try to enlist the factors that could cause competition for

Toyota and if organization is able to resolve maximum of these factors, it will pave its waytowards the blue ocean where there is no concept of competition.

5.2 Blue Ocean Strategy by Toyota Corporation

"Go where profit and growth are - and where the competition isn't"

In order to analyze the way Toyota has implemented Blue Ocean Strategies there are following

techniques that could be helpful:

• Red Ocean Vs Blue Ocean

• Four Action Frameworks

• Value Innovation

• 4 Hurdles to Execution

5.2.1 Red Ocean Vs Blue Ocean

5.2.1.1 Red Ocean (other service provider)

1. All the companies try to capture that part of the market which is highly paying.

2. There are many organizations which are producing their products in-house and thismakes them weak in competing with their rivalry forces.

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5.2.1.2 Blue Ocean (Toyota)

1. Toyota is targeting those individuals who can pay reasonable price for its products and

they are non-users of organizational products.

2. By having a strong network of suppliers organization could meet the demands of itscustomers living different parts of the world.

5.2.2 Four Action Frameworks:

This tool also help the Toyota in entering to the Blue Ocean and targeting that is not targeted yet

by:

Eliminate: Those factors which cause competition should be eliminated.

Reduce: These are the elements which reduced from the requirements that industry have.

Rise: These are elements which can be improved.

Create: These are factors which are not yet experienced by the industry.

Toyota had used this Framework in the following manner:

Eliminate

Toyota outsourced its production and eliminated this factor.

Reduce

Price is the factor that is being reduced by Toyota to almost one third.

Raise

Toyota raised the delivery standards for the smooth flow of products to the customers.

Create

Organization is trying for all those elements which are not yet experienced by the industry like

the concept of Hybrid technology was firstly presented by Toyota.

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5.2.3 Value Innovation

As discussed earlier that value innovation is the combination of two strategies which are productdifferentiation and cost leadership, Toyota Motor Corporation is focusing on both to provide

greater utility to its customers against the amount paid by them to the company.

5.2.4 4 Hurdles to Execution as per BOS

Cognitive hurdle: Thinking could be a hurdle for the organization as its suppliers may think to produce cars to be sold by them only.

Resources: Toyota organization has sufficient capital resources of 397.05 billion yen to increase

the size of its business and to target non-users of its products to enter in blue oceans.

(www.toyota-global.com)

Motivation: It could be challenging for the organization to motivate its suppliers.

Politics: Due to rules, regulations and procedures that Toyota has designed, there is no risk of

organizational polities.

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6. Conclusion

Hence, to make those customers of the organization who are not yet using its products is meant

to create blue oceans where organization would try to produce those goods which have no close

substitute.

As the Toyota would be the first organization to enter that segment which is ignored by others so

there will be no existence of any kind of competition. It is discussion throughout the assignmentthat there are many organizations which are producing quality products but these are similar to

those produced by their competitors so this impact negatively on their profitability and growth

and their profit margins are declining as they need to reduce their prices in accordance with

pricing strategies for their customers. However, Blue Ocean provides the solution to this problem by giving organizations a completely new direction of targeting those individuals who are not yet

using the products of organization with the help of various techniques like Four Action Model

etc.

In order to give a clear understanding about the management principles, rules, regulations, and

procedures of Toyota, organization has a sound socialization process that provides orientation tothose employees who had just join the Toyota.

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