Final Exam Study Guide

Final Exam Study Guide - Chapter 1: Creating Blue Oceans...

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Chapter 1: Creating Blue Oceans Cirque de Soleil productions have been seen by almost 40 million people in ninety cities around the world. In less than 20 years it has achieved a level of revenues that took Ringling Brothers and Barnum & Bailey more than 100 years to obtain. Companies don’t win when they compete with each other. Red Ocean: represent all the industries in existence today. This is referred to as “known” market space. In red oceans, industry boundaries are defined and accepted and the competitive rules of the game are known. Here, Companies try to outperform their rivals to grab a greater share of demand. Blue Ocean: denote all the industries not in existence today. This is referred to as “unknown” market space. Market space, demand creation, and opportunity for highly profitable growth are present. Red Ocean Strategy Blue Ocean Strategy: Compete in existing market space Create uncontested market space Beat the competition Make the competition irrelevant Exploit Existing demand Create and capture new demand Make the value-cost trade-off Break the value-cost trade-off Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost. Align the whole system of a firm’s activities in pursuit of differentiation and low cost.
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Industries are continually evolving. Operations improve, markets expand, and players come and go. To focus on red ocean is therefore to accept the key constraining factors of war (Limited terrain and need to beat the enemy to succeed) and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested. A strategic move: the set of managerial actions and decisions involved in making a major market-creating business offering. Value innovation: instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening new and uncontested market space. Innovation without value tends to be technology driven, market pioneering, or futuristic, often shooting beyond what buyers are ready to accept or pay for. Occurs when companies align innovation with utility, price, and cost positions. Importantly, value innovation defies one of the most commonly accepted dogmas of competition-based strategy: the value-cost trade-off. o It is believed that companies can either create greater value to customers at a higher cost or create reasonable value at a lower cost. o Here strategy is seen as making a choice between differentiation and low cost.
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Value innovation requires companies to orient the whole system toward achieving a leap in value for both buyers and themselves. Structuralist view or environmental determinism:
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This note was uploaded on 08/15/2011 for the course MGT 401 taught by Professor Dalton during the Summer '08 term at SUNY Buffalo.

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Final Exam Study Guide - Chapter 1: Creating Blue Oceans...

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