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Blue Ocean Strategy

Blue Ocean Strategy. W. Chan Kim, Renée Mauborgne. Strategy as Competition. The competitive arena is a given Industry structure (five forces, supply and demand characteristics) shapes … … buyers and sellers conduct (strategies and implementation) which …

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Blue Ocean Strategy

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  1. Blue OceanStrategy W. Chan Kim, Renée Mauborgne

  2. Strategy as Competition • The competitive arena is a given • Industry structure (five forces, supply and demand characteristics) shapes … • … buyers and sellers conduct (strategies and implementation) which … • determines performance (competitive advantage) • Differentiation and low cost are a tradeoff

  3. “Red Oceans” • Industry boundaries defined, accepted • Dimensions of competition well established • Companies compete along the same dimensions for the same customers • Over time, strategies and products converge, competition intensifies, profits and growth wane

  4. “Blue Oceans” • Undefined industry and market space! • Demand is latent – even customers don’t know that they want _______ • No competition! • Tremendous profit potential

  5. Pause for Thought • Can insight be taught? • Can opportunities for quantum “breakthroughs” be analytically identified? • Can vision be summoned on demand? • Why are people like Steven Jobs so rare?

  6. Blue Ocean StrategyW. Chan Kim, Renée MauborgneHarvard Business Review, October 2004 • “The creation of blue oceans … is very much a product of strategy, and as such, is very much a result of managerial actions.” • Not usually a technological breakthrough; not necessarily a whole new industry.

  7. “Blue Ocean” Strategy • Industry / market space can be “reconstructed” to create “blue oceans” of new unserved demand • Reorient attention from competitors to alternatives, from consumers to non-customers! • Strive to reduce company costs and increase value to buyers!

  8. “Strategy Canvas” &“Value Curves” • Strategy canvas • Dimensions of competition on the horizontal axis • Level of company’s offering on the vertical axis (high / low) • “Value curve” is a plot of a company’s relative position on this “canvas”

  9. Four Action framework • Eliminate! factors that the industry takes as given dimensions of competition • Create new dimensions of competition • Reduce offering on some dimensions well below industry average • Increase offering on some dimensions well above industry average

  10. A Blue Ocean Value Curve • A sound value curve must • have Focus – consistency, logic • Diverge from the industry norm • Strategy is about being different (Porter) • Have a “compelling tag line” – an identifying feature • Strategy makes an organization comprehensible (Mintzberg)

  11. Classic Blue Ocean Strategies • Model T Ford – Assembly line technology made cars affordable for a mass market. • Nintento Wii – brought millions of new customers (even senior citizens) into the market for video games. • Cirque du Soleil – created a new form of hybrid, upscale entertainment

  12. What’s the next big Blue Ocean strategy?

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