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Blue Ocean StrategyBlue Ocean Strategy
Prof.Dr.Aung Tun ThetProf.Dr.Aung Tun Thet
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Lifes most urgent question is:
What are you doing for others?
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You have two hands.
One is for helping yourself.
The other is for helping others.
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We do no great things,
Only small things with great love.
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Introduction
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Competing in overcrowdedindustries no way to sustain high
performance
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Create blue oceans ofuncontested market space
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Strategy FormulationExternalAppraisal
InternalAppraisal
Threats/Opportunities
Strengths/Weaknesses
Key successfactors
Distinctivecompetencies
Strategy
creation
CSRManagerial
valuesStrategychoice
implementation
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Forms of Strategy
Intendedstrategy
Deliberatestrategy
Realized
strategy
Unrealized
strategy
Emergent
strategy
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Blue and Red Oceans
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100 years ago
Automobiles
Music recorders
Aviation
Pharmaceutical Management consultancy
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30 years ago
Cellular phones
Biotechnology
Express package delivery
Snowboards Coffee bars
Home videos
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20 years from now
Blue ocean the engine of growth
Red oceans establishedmarket spaces shrinking
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Business Universe
BlueOceans
RedOceans
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RedOceans
All industries in existence Known market space
Industry boundaries defined andaccepted Competitive rules of gameunderstood
Try to outperform rivals Overcrowded Prospects for growth and profitsreduced
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BlueOceans
Industries not inexistence Unknown market space
Space untainted by competition Demand created not fought over Opportunity for growth and profitsreduced
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Two ways to create Blue Oceans
Completely new industry
eBay Created from within a Red
Ocean alters boundaries
of existing industry Cirque Soleil break
through barrier separating
circus and theater
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Blue Ocean New term
Concept not new
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The Paradox of Strategy
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Red Oceans Common
86% of new ventures line extensions
14% create new markets or industries
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Contrasts
62
39 38
61
0
10
20
30
40
50
60
70
%
Line extensions New markets and
industries
Revenues Profits
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Imbalance Corporate strategy influenced by military
strategy Strategy about competition
Confronting an opponent Driving out of territory
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Red Ocean Accepting key constraining factors of war
Limited terrain
Need to beat an enemy to succeed
Denying the distinctive strength of thebusiness world capacity to create newuncontested market space
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Red Ocean Japanese competition in the 70s and 80s
Competition the core of corporate successor failure
Competitive advantage companiesoutperform rivals and capture greatermarket shares
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Focus on competition Ignore two important aspects
1. Find and develop markets where there islittle or no competition blue oceans
2. Exploit and protect blue oceans
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Blue Ocean Strategy
Doing business where there is no
competitor Creating new land not dividing up
existing land
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Towards Blue Ocean
Strategy
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Strategic logic of Blue Ocean
Strategy
Blue oceans not about technological innovations
Incumbents often create blue oceans andusually within their core business
Traditional units of strategic analysis company
and industry little explanatory power Creating blue oceans builds brands
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Blue Ocean Strategic Thinking
Away from traditionalmodel
Understanding the
difference Red and BlueOceans
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Three Circle
Strategic Thinking
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Executives Understand the importance of competitive
advantage to grow and be profitable over thelong term
Confused by language of strategy
Bogged down with technical details of analyticaltools
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Three Circles Visual representation of strategy
Simple tool
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Competitors
offerings
Customers
needs
Companys
offerings
EWhiteSpace(BLUE
OCEAN)
APoints
of parity
BOur points
of difference
CTheir pointsof difference
G
D
F
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Three Circles First Circle: What the most important customer
or customer segments want or need
Second Circle: How customers perceive thecompanys offerings
Overlap of first and second circles: How well
the companys offerings fulfill customers needs Third Circle: How customers perceive the
offerings of companys competitors
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Each area within the circles Strategically important
A, B, and C: Critical in building competitive advantage A: How big and sustainable are our advantages? Are
they based on distinctive capabilities?
B: Are we delivering effectively in the area of parity?
C: How can we counter our competitors advantages?
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Each area within the circles E: (White Space): Blue Ocean -
Opportunity for growth D, F and G: Value the company or its
competitors create that customers dontneed
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Defining Characteristics
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Red Ocean Versus Blue Ocean Strategy
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Red Ocean Versus Blue Ocean Strategy
Blue Ocean Strategy
Create uncontested market spaceMake the competition irrelevant
Create and capture new demandBreak value/cost trade-off
Align activities in pursuit of differentiati9onand low cost
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Conventional strategy Trade-off exists between value and cost
Companies create greater value forcustomers at higher costs, or
Reasonable value at lower costs Choice between value and low cost
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Blue Ocean Strategy Rejects conventional strategy
Successful companies pursue value andlow cost simultaneously
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Blue Ocean Strategy Fundamental change in strategic mind-set
Reconstructionist view
Not the environmental determinism or
structuralist view of Red Ocean Strategy
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BUYER VALUE
COSTS
blueocean
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The Simultaneous Pursuit ofDifferentiation and Low Cost
Blue ocean created in the region where a
companys actions favourably affect bothits cost structure and its value propositionto buyers
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Ford Model T End of 19th century automobile industry small
and unattractive 500 carmakers produce handmade luxury cars
Unpopular with public
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Ford Model T Industry boundaries fashionable customized
cars and horse-drawn carriages Unlocked enormous untapped demand
One colour black
Provided value at lower cost
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Circus Business
Long-term decline
Decreasing audience
Increasing costs
Alternative forms ofentertainment
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Cirque Soleil
Reinvented the circus
Did not compete withinthe confines of the
existing industry Did not steal from
competitors
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Cirque Soleil
Created uncontestedmarket space
Made competition
irrelevant Brought in a new group of
customers adults,
corporate clients
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Conclusion
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Red and Blue Oceans
Coexists Companies must understand strategic
logic of both types
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Red and Blue Oceans
Red Oceans dominates in theory andpractice
Need to create Blue Ocean intensifies
Better balance in strategic thinking
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Its impossible, says Reason
Its reckless, says Experience
Its painful, says Pride
Try! Says Dream
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Never laugh at anyone's
dreams.
People who don't have
dreams don't have much.