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Blue Ocean Strategy: The Four Actions Framework. Jason C. H. Chen, Ph.D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA 99258 USA Red Ocean vs. Blue Ocean. RED OCEAN

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Blue Ocean Strategy: The Four Actions Framework

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    1. Blue Ocean Strategy:The Four Actions Framework Jason C. H. Chen, Ph.D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA 99258 USA

    2. Red Ocean vs. Blue Ocean • RED OCEAN • It represents all the industries in existence today – the known market • Industry boundaries are defined and accepted, and the competitive rules of the game are known. • Competition-based • BLUE OCEAN • It represents all the industries not in existence today – the unknown market • Is defined by untapped market space, demand creation, and the opportunity for highly profitable growth. • Innovation-based • It is with unlimited business opportunities.


    4. Launches within red oceans Launches for creating blue oceans The Profit and Growth Consequences of Creating Blue Oceans 86% 14% Business launch 62% 38% Revenue Impact 39% 61% Profit Impact

    5. Red Ocean Versus Blue Ocean Strategy Create uncontested market space Make the competition irrelevant Create and capture new demand Break the value-cost trade-off Align the whole system of a firm’s activities in pursuit of differentiation and low cost. Figure 1-3 (p. 18)

    6. Grid Eliminate-Reduce-Raise-Create Eliminate Raise Reduce Create

    7. The Four Actions Framework Reduce reduced Eliminate Create created eliminated Raise raised IS/IT Role? Which factors should be ________ well below the industry’s standard? Which of the factors that the industry takes for granted should be _________? Which factors should be ________that the industry has never offered? A New Value Curve Which factors should be______ well above the industry’s standard?

    8. Eliminate-Reduce-Raise-Create Grid:The Case of Southwest Airlines Eliminate Raise Meals Lounges Seating class choices Hub connectivity Friendly service Speed Reduce Create Frequent point-to-point departures Price versus average airlines

    9. align Innovation Winners vs. Losers • What separates winners from losers in creating (ultimate) strategic competitive advantage is neither bleeding-edge technology nor “timing for market entry.” • It is from “value innovation” utility Value Innovation Firm price cost

    10. Costs Value Innovation Customer Value Value Innovation Differentiation Low Cost. The Simultaneous Pursuit of and

    11. Innovation • Business Week compiled a list of the ten worst mistakes made by companies that are trying to cope during a slowing or turbulent economy. • The list reminds management that unless you really want to compete on price (i.e., cost leadership and remember, India launched its $2,500 Nano car), the ability to do sustained innovation is one of the few ways left to maintain a competitive edge and to separate yourself from your competitors. • Innovation drives performance, growth, and stock market valuation.

    12. To-Ten Innovation Mistakes a Company Can Make During a Turbulent Economy • Fire talent. • Cut back on technology. • Reduce risk. • Stop product development. • Allow boards to replace growth-oriented CEOs with cost-cutting CEOs. • Retreat from globalization. • Allow CEOs to replace innovation as key strategy. • Change performance metrics. • Reinforce hierarchy over collaboration. • Retreat into walled castle.

    13. Characteristics of a Good Strategy Three characteristics of a good strategy • Focus • a firm does not diffuse its efforts across all key factors of competition • Diverge • diverge from the other players’ • Compelling Tagline • strategic profile is clear; a fun and simple to follow (enjoy)