Blue Ocean Strategy: Chapter 9, Appendix A, B, & C
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Transcript 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
Blue 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
Reasons 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
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
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
When 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
When 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
When 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 valueinnovation 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
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
Auto industry goes back to 1893, When the
Duryea brothers launched the first onecylinder 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 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
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.
Chryslers 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.
Chryslers 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 Computer Industry
The United States computer industry traces
back to 1890
Herman Hollerith invented the punch card
tabulating machine
IBM
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 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
The 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
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
The 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.
Appendix 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
Reconstructionist 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
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