Blue Ocean Strategy:Chapter 9, Appendix A, B, & C

Blue Ocean Strategy:Chapter 9, Appendix A, B, & C

Mikey, Michael, Meredithe, Jake, Charly, Virginie, and Natalie

Mikey, Michael, Meredithe, Jake, Charly, Virginie, and Natalie

Blue Ocean strategy analysisBlue Ocean strategy analysis

Blue Ocean Strategy Dynamic situation not static

What does this mean Revaluation of strategy; determine possible external threats,

i.e. imitators

Blue Ocean strategy, on average not challenged for 10 to 15 yrs. There are reasons for this situation

Blue Ocean Strategy Dynamic situation not static

What does this mean Revaluation of strategy; determine possible external threats,

i.e. imitators

Blue Ocean strategy, on average not challenged for 10 to 15 yrs. There are reasons for this situation

Reasons for decreased imitationReasons for decreased imitation Patents or legal permits

Ex. Google and copyright and trademarks

Revolutionary ideas that are against industry standards in terms such as brand image conflict Ex. Body shop shunning models, promises of

eternal youth, and expensive packaging Quite difficult to imitate due to other companies current

business models placing stock in model industry

Patents or legal permits Ex. Google and copyright and trademarks

Revolutionary ideas that are against industry standards in terms such as brand image conflict Ex. Body shop shunning models, promises of

eternal youth, and expensive packaging Quite difficult to imitate due to other companies current

business models placing stock in model industry

Reasons for decreased imitation cont.

Reasons for decreased imitation cont.

Imitation requires companies to make substantial business model changes Ex. SWA’s extreme flexibility; cost of imitation is

unrealistically high Brand Buzz and company loyalty held by

consumers in marketplace High volume generated by a value innovation

leads to rapid cost advantages In effect giving competitors at a huge disadvantage Ex. Competing with Walmart in retail or competing

with Google’s search capabilities

Imitation requires companies to make substantial business model changes Ex. SWA’s extreme flexibility; cost of imitation is

unrealistically high Brand Buzz and company loyalty held by

consumers in marketplace High volume generated by a value innovation

leads to rapid cost advantages In effect giving competitors at a huge disadvantage Ex. Competing with Walmart in retail or competing

with Google’s search capabilities

Reasons for decreased imitation cont.

Reasons for decreased imitation cont.

Network externalities value of a product or service is dependent on

the number of others using it. Goggles search engine, i.e. Google search

Natural monopoly Industry cannot support second player

Sometimes does not make sense to a company's conventional logic

Network externalities value of a product or service is dependent on

the number of others using it. Goggles search engine, i.e. Google search

Natural monopoly Industry cannot support second player

Sometimes does not make sense to a company's conventional logic

When to Value-Innovate AgainWhen to Value-Innovate Again

Be careful not to loose focus:

When competitors arise, companies usually launch offense to defend their customer base

Companies can be obsessed with hanging on to their market share

Finally, competitors and not customers may come to occupy the center of the company’s attention

Be careful not to loose focus:

When competitors arise, companies usually launch offense to defend their customer base

Companies can be obsessed with hanging on to their market share

Finally, competitors and not customers may come to occupy the center of the company’s attention

When to Value-Innovate AgainWhen to Value-Innovate Again

How to avoid the trap of competing? By monitoring the value curves on the strategy

canvas.

How does it help you? Alerts you to reach out for another ocean when you

curves converge with your competitors ones Keeps you from pursuing another ocean when yours

is still profitable

How to avoid the trap of competing? By monitoring the value curves on the strategy

canvas.

How does it help you? Alerts you to reach out for another ocean when you

curves converge with your competitors ones Keeps you from pursuing another ocean when yours

is still profitable

When to Value-Innovate AgainWhen to Value-Innovate Again

When your Blue ocean turns Red Rivalry intensifies and supply exceeds demand Your competitors’ value curves converge toward

yours. Should begin to reach out for another value-

innovation to create a new blue ocean By applying the six principles of blue oceans

strategy , companies should go beyond competing for share to creating blue oceans and understand how to make the competition irrelevant

When your Blue ocean turns Red Rivalry intensifies and supply exceeds demand Your competitors’ value curves converge toward

yours. Should begin to reach out for another value-

innovation to create a new blue ocean By applying the six principles of blue oceans

strategy , companies should go beyond competing for share to creating blue oceans and understand how to make the competition irrelevant

A Sketch of the Historical Pattern of Blue Ocean Creation

A Sketch of the Historical Pattern of Blue Ocean Creation

Overview of the history of three American industries… Automobiles, Computers and Movie Theaters. this review intends to be neither comprehensive in its

coverage nor exhaustive in its content. Its aim is limited to identifying the common strategic elements across key blue ocean offerings.

U.S. industries are chosen here because they represent the largest and least regulated free market during our study period.

Appendix A is only a sketch of the historical pattern of blue ocean creation, several patterns stand out across these three representative industries.

Overview of the history of three American industries… Automobiles, Computers and Movie Theaters. this review intends to be neither comprehensive in its

coverage nor exhaustive in its content. Its aim is limited to identifying the common strategic elements across key blue ocean offerings.

U.S. industries are chosen here because they represent the largest and least regulated free market during our study period.

Appendix A is only a sketch of the historical pattern of blue ocean creation, several patterns stand out across these three representative industries.

The Automobile Industry The Automobile Industry

Auto industry goes back to 1893, When the Duryea brothers launched the first one-cylinder auto in the United States. At this time the primary transportation was the

horse and buggy. The autos of the time were a luxurious novelty. They were twice the average family's annual

income costing $1,500

Auto industry goes back to 1893, When the Duryea brothers launched the first one-cylinder auto in the United States. At this time the primary transportation was the

horse and buggy. The autos of the time were a luxurious novelty. They were twice the average family's annual

income costing $1,500

The Model TThe Model T In 1908, while America’s five hundred automakers

built custom made novelty automobiles, Henry Ford introduced the Model T.

“The car for the great multitude, constructed of the best materials”

Model T was affordable 1908: $850 1909: $609 1924: $290

In 1908, while America’s five hundred automakers built custom made novelty automobiles, Henry Ford introduced the Model T.

“The car for the great multitude, constructed of the best materials”

Model T was affordable 1908: $850 1909: $609 1924: $290

Small, Fuel Efficient Japanese Cars

Small, Fuel Efficient Japanese Cars

In 1970’s Japanese created a new blue ocean. Instead of “ the bigger the better” Japanese altered the conventional logic, pursuing ruthless quality, small size, and highly gas efficient cars.

1970’s an oil crisis occurred, the U.S. consumers needed fuel- efficient, robust Japanese cars, which were cars made by Honda, Toyota, and Nissan.

Big Three were still hit b a drive in car sales with losses mounting to $4 billion in 1980. Chrysler the smallest out of the big three suffered the most.

In 1970’s Japanese created a new blue ocean. Instead of “ the bigger the better” Japanese altered the conventional logic, pursuing ruthless quality, small size, and highly gas efficient cars.

1970’s an oil crisis occurred, the U.S. consumers needed fuel- efficient, robust Japanese cars, which were cars made by Honda, Toyota, and Nissan.

Big Three were still hit b a drive in car sales with losses mounting to $4 billion in 1980. Chrysler the smallest out of the big three suffered the most.

Chryslers MinivanChryslers Minivan

In 1984 Chrysler on the edge of becoming bankrupt they unveiled the minivan. The boundary between a car and a van.

Within the 1st year the Chryslers minivan became the best selling vehicle.

With in three years, Chrysler gained $1.5 billion from the minivan’s introduction alone.

In 1984 Chrysler on the edge of becoming bankrupt they unveiled the minivan. The boundary between a car and a van.

Within the 1st year the Chryslers minivan became the best selling vehicle.

With in three years, Chrysler gained $1.5 billion from the minivan’s introduction alone.

Chryslers SUVChryslers SUV The success of the Minivan ignited the Sports

Utility Vehicle (SUV) in the 1990s Built on a truck chassis First designed for off-road driving and towing

boat trailers Had carlike handling By 1998,total sales of new light trucks (minivans,

SUVs, and pickups) reached 7.5 million, nearly matching the 8.2 million new car sales.

The success of the Minivan ignited the Sports Utility Vehicle (SUV) in the 1990s

Built on a truck chassis First designed for off-road driving and towing

boat trailers Had carlike handling By 1998,total sales of new light trucks (minivans,

SUVs, and pickups) reached 7.5 million, nearly matching the 8.2 million new car sales.

The Computer IndustryThe Computer Industry

The United States computer industry traces back to 1890

Herman Hollerith invented the punch card tabulating machine

The United States computer industry traces back to 1890

Herman Hollerith invented the punch card tabulating machine

IBMIBM

Hollerith sold his company which was later merger to form the CTR in 1911 CTR than became IBM

In 1953, IBM introduced the IBM 650 which was the first computer for business purposes It cost $200,000

Hollerith sold his company which was later merger to form the CTR in 1911 CTR than became IBM

In 1953, IBM introduced the IBM 650 which was the first computer for business purposes It cost $200,000

The Electronic ComputerThe Electronic Computer

At the end of the 1950s, IBM controlled 85 percent of the electronic computer market

In 1964, the system 360 was introduced which included service packages

In 1978, Apple designed the Apple II home computer which was more advanced Build a blue ocean for home computing Came with software ranging from games to

business programs

At the end of the 1950s, IBM controlled 85 percent of the electronic computer market

In 1964, the system 360 was introduced which included service packages

In 1978, Apple designed the Apple II home computer which was more advanced Build a blue ocean for home computing Came with software ranging from games to

business programs

The Electronic ComputerThe Electronic Computer In 1980, Apple sold 724,000 home computers

Fortune 500 company Shortly after twenty new companies were

started Caused Apple to make $3 Billion because of high

demand IBM survey the market first before taking any

other action 1982 IBM expanded the blue ocean

In 1980, Apple sold 724,000 home computers Fortune 500 company

Shortly after twenty new companies were started Caused Apple to make $3 Billion because of high

demand IBM survey the market first before taking any

other action 1982 IBM expanded the blue ocean

Compaq PC Servers and Dell Computers

Compaq PC Servers and Dell Computers

In 1992, IBM Compaq created another blue ocean by launching the ProSignia It change the way file sharing was done

Dell change the computer industry by allowing the consumer to order and customized online Built-to-order reduced inventory cost Leader in PC sales with revenues of $35.5 billion in

2003 Each blue ocean that was created in the

computer industry is increasing the profit of overall growth for all computer companies

In 1992, IBM Compaq created another blue ocean by launching the ProSignia It change the way file sharing was done

Dell change the computer industry by allowing the consumer to order and customized online Built-to-order reduced inventory cost Leader in PC sales with revenues of $35.5 billion in

2003 Each blue ocean that was created in the

computer industry is increasing the profit of overall growth for all computer companies

The Movie Theater IndustryThe Movie Theater Industry 1893 Thomas Edison developed the “peep show” 1895 Edison’s staff made a projecting Kinetoscope, which showed motion pictures on a

screen.

1905 First Nickelodeon Theater in Pittsburg.Only 5 cents so that lower class could enjoy the entertainment.

1914 the U.S had 1,800 Nickelodeon’s with seven million in daily admissions 1914-1922 four thousand Palace theaters opened. Samuel “Roxy” Rothapfel made the

theaters elaborate affairs.

1963 Stan Durwood started a family theater in a Kansas City shopping center. 1980’s Cassette tapes, satellite, and cable television hurt the theater industry.

1995 AMC created the 24 screen Megaplex By 2000 many had closed due to the slowing economy. The theater industry is ready for

a new blue ocean.

1893 Thomas Edison developed the “peep show” 1895 Edison’s staff made a projecting Kinetoscope, which showed motion pictures on a

screen.

1905 First Nickelodeon Theater in Pittsburg.Only 5 cents so that lower class could enjoy the entertainment.

1914 the U.S had 1,800 Nickelodeon’s with seven million in daily admissions 1914-1922 four thousand Palace theaters opened. Samuel “Roxy” Rothapfel made the

theaters elaborate affairs.

1963 Stan Durwood started a family theater in a Kansas City shopping center. 1980’s Cassette tapes, satellite, and cable television hurt the theater industry.

1995 AMC created the 24 screen Megaplex By 2000 many had closed due to the slowing economy. The theater industry is ready for

a new blue ocean.

Appendix B – Value InnovationAppendix B – Value Innovation

Strategies need to be related to specific industry structure

Two basic strategic views here: Structuralist view deals with strategy changes based on

external factors to the company’s structure, buyer and seller conduct, and end performance

Reconstructionist view theorizes that economic structure can be changed by forces internal to the organization

Strategies need to be related to specific industry structure

Two basic strategic views here: Structuralist view deals with strategy changes based on

external factors to the company’s structure, buyer and seller conduct, and end performance

Reconstructionist view theorizes that economic structure can be changed by forces internal to the organization

Reconstructionist ViewReconstructionist View

If your strategy is molded from within your organization, you need to replicate not others ideas, but their innovative techniques.

New Growth Strategy This internal mind-set is essential for firms that

want to enter Blue Oceans and have new, different customer demands

If your strategy is molded from within your organization, you need to replicate not others ideas, but their innovative techniques.

New Growth Strategy This internal mind-set is essential for firms that

want to enter Blue Oceans and have new, different customer demands

Optimal Strategy View?Optimal Strategy View? Structuralist vs. Reconstructionist views Blue Ocean seekers use Reconstructionist

view tend to focus on buyer value elements in

products, not strategies based on operations, cost or technology advancement.

This view ignores that there are boundaries of the structure of an industry which creates a blue ocean of new market space

Structuralist vs. Reconstructionist views Blue Ocean seekers use Reconstructionist

view tend to focus on buyer value elements in

products, not strategies based on operations, cost or technology advancement.

This view ignores that there are boundaries of the structure of an industry which creates a blue ocean of new market space