Chapter 9_Blue Ocean Strategy

THE SUSTAINABILITY ANDRENEWAL OF BLUE OCEAN

STRATEGY

(Chapter 9: Conclusion)

by Anastacio, Alyanna

Lordan, Mara Vanessa

INTRODUCTION

In this concluding chapter, we address the issues

of the sustainability and renewal of blue ocean strategy.

“Creating a blue ocean strategy is not a static achievement but a dynamic process”

-Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, W. Chan Kim and Renee Mauborgne, 2005

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INTRODUCTION

After a company creates a BLUE OCEAN and its powerful performance consequences are known sooner or later imitators appear on the horizon.

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This raises a related question:

When should a company reach out to create another BLUE OCEAN?

BARRIERS TO IMMITATION

A blue ocean brings barriers to imitation; some being operation and others cognitive

BARRIERS TO IMITATION

A value innovative move does not make sense based on conventional strategic logicEX: CNN

Brand image conflict prevents companies from imitating a blue ocean strategy. EX: The Body Shop

BARRIERS TO IMITATION

Natural monopoly blocks imitation when the size of a market cannot support another playerEX: Megaplex in Brussels

Patents or legal permits block imitation

BARRIERS TO IMITATION

Politics and Culture: Imitation often requires companies to make changes to existing business practices and culture Ex: Southwest (offers speed of travel with

cost/flex. of driving) Would mean major revisions in routing, training,

marketing, and pricing Brand Buzz: High leap in value leads to loyal

followers Ex: Apple products (“I’m a Mac” campaign)

BARRIERS TO IMITATION

Cost Advantages: High volume by value innovation Ex: Apple ‘i’ products helped discourage

imitation for awhile

Network externalities: the more customers, the more attractive a company looks Ex: ebay – many buyers/sellers; hard to get them

to move to a potential imitator

APPLE’S OCEANS: THE TECHNOLOGY INDUSTRY

Drowning in a red ocean Moving to a blue ocean Blue oceans turn to red oceans

What is the next step? Make another blue ocean (try to incorporate the

barriers to imitation)

WHEN TO VALUE-INNOVATE AGAIN?

Eventually every blue ocean strategy will be imitated.

In an effort to hold on to customer base a firm can become focused on the competition instead of the buyer.• Apple in late 80’s.

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WHEN TO VALUE-INNOVATE AGAIN?

To avoid this trap a company needs to monitor their value curves.

When a company’s value curve still has focus, divergence and a compelling tagline you should focus on expanding it and not re-innovating.

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WHEN TO VALUE-INNOVATE AGAIN?

• As long as value curve still good a company should focus on operation improvements, geographic expansion, economies of scale and market coverage.

• As more competitors enter the market and rivalry intensifies a blue ocean will turn red.

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WHEN TO VALUE-INNOVATE AGAIN?

• This can be seen by plotting you and your competitions value curves on a strategy canvas.

• As they converge a company should start looking for a new blue ocean.

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BLUE and RED oceans

BLUE AND RED OCEANS

Long-run profitability growth is a result of value-innovation

Create a blue ocean when competitors aggressively imitate and credibly converge value curves

Go beyond competing for market share and create blue oceans

BLUE AND RED OCEANS

Blue and Red oceans have always coexisted “Great” businesses can succeed in both

oceans Good companies must master their

strategies for both oceans to become Great companies

To create a blue ocean a company must make competitors in the red ocean irrelevant Via value-innovation

THE SIX PRINCIPLES OF BLUE OCEAN STRATEGY

REMEMBER :Formulation Principles

1. Reconstruct market boundaries

> reduce search risk2. Focus on the big picture, not the numbers > reduce planning risk3. Reach beyond existing demand

> reduce scales risk4. Get the strategic sequence right

> reduce business model risk

Executive Principles5. Overcome key organizational hurdles

> reduce organizational risk6. Build executive into strategy

> reduce management risk

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SWIM as far as to DOMINATE the BLUE OCEAN over your IMITATORS for as long as possible!