ILRHR4640 Lecture 6- Blue Ocean Strategy Article

ILRHR4640 Lecture 6- Blue Ocean Strategy Article - Blue...

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Unformatted text preview: Blue Ocean Strategy Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne Dr. Daniel Cohen Blue Ocean VS Red Ocean Blue Ocean VS Red Ocean Red Ocean— industry boundaries are defined and accepted. Companies focus on OE A fixed­pie mentality Blue Ocean: creates a new market space untainted by competition. Blue Ocean’s acquire customers rapidly Create uncontested market space Blue Ocean, cont Blue Ocean, cont Blue oceans a blue ocean is typically created from within a red ocean How did Cirque du Soleil create a blue ocean from the declining circus industry? The Paradox of Strategy The Paradox of Strategy Business strategy hails from military strategy Blue ocean strategy, by contrast, is about doing business where there is no competitor. Focusing on red oceans means accepting the constraining factors of war: Strategy belief: must tradeoff between cost and value limited terrain and the need to beat an enemy to succeed Towards Blue Oceans Towards Blue Oceans Blue oceans are not about technology innovation per se Incumbents often create blue oceans Ie Chrylser with Minivan, Dell , and amc with the muliplex and megaplex Draw huge numbers of customers immediately Create an immediate brand image. R&D is not the key to creating new market space. The key is making the right strategic moves. IE home depot and walmart, the model T, and IBM Creating blue oceans builds brands The Defining Characteristics The Defining Characteristics Never use competition as a benchmark (i.e. Southwest started to give alternative to bus travel) Blue ocean converts reject the main notion of strategy Blue Ocean’s pursue differentiation and low cost simultaneously Rejection of Strategy, cont Rejection of Strategy, cont Both parties achieve extra value by lowering costs while raising value It is a whole­system approach, when a company’s utility, price, and cost activities are aligned, that makes the creation of blue oceans a sustainable strategy This is Porter’s integrated cost leadership/differentiation strategy What did he mention as its biggest risk? How does the blue ocean approach differ and make the risk tolerable? Barriers to Imitation Barriers to Imitation Companies that create blue oceans usually reap benefits without credible challenges for 10­15 years. Why is this advantage sustainable for so long? Examples: Cirque du Soleil, Home Depot, Federal Express, Southwest Airlines, CNN and Wal­mart, to name just a few. Source: Mason Carpenter, Source: Mason Carpenter, Wisconsin Business School How to Innovate: Eliminate INNOVATION Keep Same Raise Reduce Create/Add Example: Amazon Example: Amazon Greatest selection of books on planet (raise) Greater convenience (reduce time) Developed software infrastructure for process (create/add) Threatened brick and mortar bookstores (eliminate retail presence) Still selling books (keep same) Questions? Questions? ...
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