Blue Ocean Strategy
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Transcript of Blue Ocean Strategy
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Blue Ocean Strategy
Rebecca EggermanAlexander Johnson
Miguel A. LopezHannah StephensCarissa Tarnowski
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PreviewCirque du SoleilBlue Vs. Red OceanCreation of New Blue OceansBlue OceansBlue Vs. RedResult of Blue Ocean InitiativesThe Rising Imperative of Creating Blue
OceansResultsFrom Company and Industry to Strategic
Move
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PreviewThe Strategic MoveValue InnovationValue-Cost Trade-off Benchmarking CompetitionBreaking the Market BoundariesFormulating and Executing Blue Ocean
StrategyFrameworks for SuccessBeyond the Text
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Cirque du SoleilCreated in 1984 by group of street
performers
Seen by 40 million people in 9 cities around the world
Achieved the same level of revenues that Ringling Bros. and Barnum & Bailey made in 100 years but in only 20 years
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Blue Vs. Red OceanRed Ocean
Represents all the industries in existence todayThis is known as the market placeIndustry boundaries are defined and acceptedCompetitive rules of the game are knownCompanies try to outperform their rivals to
grab a greater share of existing demand
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Blue Vs. Red OceanBlue Ocean
Is defined by untapped market space, demand creation, and the opportunity for highly profitable growth
Some are created within red oceans by expanding existing industry
Competition is irrelevant because the rules of the game are waiting to be set
They are uncharted
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Creation of New Blue OceansNew industries are constantly being createdHistorically, countless industries that exist
today did not exist decades agoChange from SIC to NAICSMilitary strategy in business
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Blue OceansNew industries are constantly being created
that would not have even been thought of 30 or even 10 years ago
Smartphones, flat screen televisions, clean jet engines vs. airplane, automobile, radio, television
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Blue Ocean vs. Red OceanMajority of new business plans are aimed at
red ocean strategiesOnly 14 percent of new business launches
were aimed at blue oceans
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Result of Blue Ocean InitiativesBlue ocean business launches do not affect
revenues but increase profits much more often than red ocean endeavors
Impact of blue oceans is notable even though they make up such a small minority of business endeavors
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The Rising Imperative of Creating Blue Oceans Technological advances
Increasing numbers of industriesSupply exceeds demand
GlobalizationReadily available consumer informationDrowning markets
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ResultsAccelerated commoditization
Products and services becoming similarConsumer selection based on price
Ex. Colgate vs. Crest Red oceans become “deeper”
More cut throat competitionNeed for blue oceans
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From Company and Industry to Strategic MoveHow to achieve blue ocean status
Researching “excellence” and “visionaries” Ex. In Search of Excellence and Built to Last
Industry vs. company success (Creative Destruction) Ex. Hewlett-Packard
Right one minute, wrong another Companies and industries not correct analysis unit
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The Strategic Move
Blue ocean research Small/large companiesYoung/old managersPrivate/publicLow/high –tech
Similar patternStrategy
“Set of managerial actions and decisions involved in making a major market creating business offering”
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Value Innovation: The cornerstone of Blue Ocean StrategyApproach to strategy- what separated the
winners from the losersConsistent across time regardless of industry
Red ocean companies raced to beat competition through defensible position
Blue ocean companies didn’t use competition as a benchmarkFollowed value innovation
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Value InnovationFocus on making the competition irrelevant by creating a
leap in value for buyers and your company, thereby opening up new and uncontested market space
Equal emphasis on value and innovation Value without innovation= value creation Innovation without value= technology driven, market
pioneering, or futuristic
Occurs only when companies align innovation with utility, price, and cost positions
A new way of thinking about and executing strategy that results in creation of a blue ocean and a break from competition
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Value-cost trade-off Conventional belief- companies can create
greater value to customers at a higher cost or create reasonable value at a lower costExamples?
Should pursue low cost and differentiation simultaneously
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Benchmarking competition and maximizing shrinking share
Red ocean strategy
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Breaking the market boundaries of theater and circus
Blue ocean strategyAchieved both differentiation and low cost
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Red Ocean Vs. Blue Ocean StrategyRed Ocean Strategy Blue Ocean Strategy
Compete in existing market place 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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Formulating and Executing Blue Ocean StrategySuccess
Lower odds?Strategy
OpportunityRisk
Analytical Frameworks and ToolsRed Oceans
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Frameworks For SuccessChapter 2
Analytical ToolsChapter 3
Search RiskChapter 4
Value Innovations
Chapter 5Market Size
Chapter 6Business Model
Chapter 7Tipping Point
LeadershipChapter 8
Strategy MakingChapter 9
Dynamic Aspects
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Principles
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Beyond the TextSingle-cup Coffee Makers
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OverviewCirque du SoleilBlue Vs. Red OceanCreation of New Blue OceansBlue OceansBlue Vs. RedResult of Blue Ocean InitiativesThe Rising Imperative of Creating Blue
OceansResultsFrom Company and Industry to Strategic
Move
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OverviewThe Strategic MoveValue InnovationValue-Cost Trade-off Benchmarking CompetitionBreaking the Market BoundariesFormulating and Executing Blue Ocean
StrategyFrameworks for SuccessBeyond the Text
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“We cannot predict the future. But we can create it.”
-Jim Collins, Great by Choice