Transcript: Integration of execution into strategy making Motivates people to act on and execute a blue ocean strategy in a sustained way deep in an organization Fair Process Facilitates both strategy making and execution Mobilizes people for voluntary cooperation Deals with management risk Cirque du Soleil Design strategic planning process to go beyond incremental improvements Tackles planning risk Creates value innovations Visualization approach drives focus on big picture Four-step planning process whereby you can build a strategy that creates and captures blue ocean opportunities Reconstruct buyer value elements --> new value curve Which of the factors that the industry takes for granted should be eliminated? Which factors should be reduced well below the industry’s standard? Which factors should be raised well above the industry’s standard?• Which factors should be created that the industry has never offered? Creating and Capturing Blue Oceans Eliminate-Reduce-Raise-Create Grid Principles that Drive Effective Execution Focus Divergence Compelling Tagline Systematically creating "blue oceans" across diverse industry domains Attenuating search risk Six conventional boundaries of competition Alternative industries, across strategic groups, across buyer groups, across complementary product and service offerings, across the functional-emotional orientation of an industry, and across time Build a viable business model to produce and maintain profitable growth Benefits of the grid Pushes companies to simultaneously pursue differentiation and low costs to break value-cost trade-off Flags companies focused only on raising and creating --> lifts cost structure Easily understood Scrutinize every factor in industry Value Innovation What is a "Blue Ocean"? Addresses business model risk Sequence to create strategy to ensure both company and customers win in new business terrain Sequence: utility, price, cost, adoption Diagnostic and action framework Captures current state of the known market space Reorient strategic focus from competitors to alternatives from customers to noncustomers W. Chan Kim Renée Mauborgne Maximize size of blue oceans Minimizes scale risk Aggregate demand by building on powerful commonalities across non-customers to maximize uncontested market space. Principles for Successful Formulation of Blue Ocean Strategy Blue Ocean Strategy focuses on the creation of uncontested markets. Market space Competition Demand Trade-Off Tipping point leadership Effective management by mobilizing organization Overcomes key organizational hurdles Deals with organizational risk Surmount cognitive, resource, motivational, and political hurdles In spite of limited time and resources in executing blue ocean strategy Strategy Canvas Four Actions Framework Blue Ocean Strategy Design strategy to provide a leap in value to the mass of buyers Creating a Blue Ocean "The Cornerstone of Blue Ocean Strategy" Characteristics of a Good Strategy
Transcript: Red versus blue Red Ocean Strategy Blue Ocean Strategy Compete in existing market space Break the valuecost tradeoff Make the competition irrelevant Align the whole system of a company’s activities with its strategic choice of differentiation or low cost Blue Ocean Strategy Researching the History of Blue Ocean Creation Exploit existing demand 1. Based on a study of 150 strategic moves spanning more than a hundred years and thirty industries, Kim and Mauborgne argue that tomorrow’s leading companies will succeed not by battling competitors 2. Strategic Moves - "Value Innovations"create powerful leaps in value for both the firm and its customer Align the whole system of a company’s activities in pursuit of differentiation and low cost Create uncontested market space Make the valuecost tradeoff By, W. Chan Kim and Renee Mauborgne Create and capture new demand Beat the competition
Transcript: Best In The World At At Movie Rentals Flexible Low membership in High Cost Plans Deeply Passionate About Delighting Subscribers Lower Because of Downloading Poor Packaging Shipping Cost Availability of Substitutes Bargaining Power of Customers Bargaining Power of Suppliers Chose to Rent or Not No Negotiating Power Great Relationships w/ Distributors Porter's Five Forces Treat Current Members As If They Were Trial Members New Contracts! Threats SWOT Analysis Overall Attractiveness of Industry Movies Going Out to Eat Bowling Cards/Board Games Etc... Strategies Based of Mission/Vision Internet Fraud Partnership w/ Nintendo and Warner Bros. Growing Demand for Online Streaming High b/c One Up The Other Opportunities Technology Excellent Marketing Strategies Wide Range of Collections Weaknesses Growth for Online Spending Higher Standard of Shipping Their Own Delivery System "Our appeal and success are built on providing the most expansive selection of DVDs; and easy way to choose movies; and fast, free deliver." Strengths Strategies Based on Objectives Economic Engine Having People Rent Movies Headhog Concept Objective: "To convert as many free trial users to main users as possible and to retain paid users over the long rung" Brand Image/ Legal Tangles Good to Get Into Now b/c Low Barriers But Rivalries are Strong Suppliers Have Power Other Entertainments Barriers Powerful b/c of Licensing Movies Studios don't Depend on Movie Rental Industry Developing Strategy Lower Digital Distribution Rivalry
Transcript: 1.- To launch completely new industries, as eBay did with online auctions. But it's much more common for a blue ocean to be created from within a red ocean when a company expands the boundaries of an existing industry. 2.-The most appropriate unit of analysis is the strategic move, the set of managerial actions and decisions involved in making a major market-creating business offering. http://youtube.googleapis.com/v/98X3_X_VG-8&source=uds&autoplay=1 1.- Live Music, No Animals 2.-Customs, Make Ups, Show, Performance 3.-Expensive but worth it (exclusive) 4.-Update the shows, Tropicalize 5.- Stonish, Lay Out for the audience. Dreamers, Interested in Culture, Difficult to Impressed, Familiar Entertainment, Recognizment, Socioeconomical A Market. There are two ways to create blue oceans In red oceans--that is, in all the industries already existing--companies compete by grabbing for a greater share of limited demand. As the market space gets more crowded, prospects for profits and growth decline. Products turn into commodities, and increasing competition turns the water bloody. Cirque du Soleil profitably increased revenue twenty-two-fold over the last 10 years by reinventing the circus. Rather than competing within the confines of the existing industry or trying to steal customers from rivals, Cirque developed uncontested market space that made the competition irrelevant. Cirque created what the authors call a blue ocean--a previously unknown market space. In blue oceans, demand is created rather than fought over. Which are Blue Ocean Strategy Creating blue oceans builds brands. So powerful is blue ocean strategy, in fact, that a blue ocean strategic move can create brand equity that lasts for decades. the target market of Cirque Du Soleil? the characteristics of Cirque Du Soleil In blue oceans, demand is created rather than fought over. Red Oceans
Transcript: Blue Ocean Strategy Thank you for your attention Blue Ocean Strategy Reconstructionist approach in Dubai The value proposition. - a dozen world-class free zones with unbeatable incentives for investors, - differentiation: the government allows 100% foreign ownership and free repatriation of capital and profits, - no import or re-export duties, - the corporate tax rate for the first 15 to 50 years of operations is zero and can be extended. Structuralist approach is valuable and relevant but reconstructionist approach is more appropriate in nowadays economic reality. The organization needs to consider: - the environmental attractiveness, - capabilities and resources available, - assess whether its strategic orientation is competitive, innovative or diversified, - the analysis of the industry or environmental conditions in which the organization operates. Structurialist vs. reconstructionist approach 1. How the strategy shapes structure - Structuralist approach - Reconstructionist approach 2. Three strategy propositions 3.Red Ocean Strategy 4. Blue Ocean Strategy 5. Blue Ocean Strategy vs. Five Forces 6. Practical example Red Ocean Strategy - Finding the best market approach - Taking innovation for granted Reconstructionist approach in Dubai Agenda Blue Ocean Strategy vs. Five Forces Red Ocean - the supermarket industry in Denmark For the past 30 years structuralist approach has dominated the practice of strategy. The history reveals plenty of cases in which firms’ strategies shaped industry structure, reconstructionist strategies from Ford’s Model T to Nintendo’s Wii. Reconstructionist approach in Dubai How to spot a blue ocean opportunity? Structuralist approach - assumes that the operating environment is given. Reconstructionist approach - seek to shape the environment. Structuralist strategies require that all propositions focus on delivering either low cost or differentiation, whereas reconstructionist strategy aim to deliver both. Group 12 Practical example - The Social Network The three strategy propositions Red Ocean is the world in which we live in, it’ s a business reality, which we are learnt and principles under which we surrender. The profit proposition. - differentiated ways of generating revenues while also lowering its cost structure, - Dubai has been run like a large business enterprise: “What’s good for business is good for Dubai.”, - the government has invested in the infrastructure that supports the investors’ activities—shipping and port services, transport, tourism, aviation, real estate development, export commerce, and telecommunications. Blue Ocean Strategy The people proposition. - citizens have access to a generous social security system and are virtually guaranteed a government job, - extensive state assistance: including medical care, sickness and maternity benefits, child care, free or subsidized education, pensions, unemployment benefits, and in some instances housing and disability benefits, all of which have vastly improved their quality of life, - preserving Dubai’s culture and heritage. Structurialist vs. reconstructionist approach - a fight on every rate of share - players want to manufacture the products and provide services cheaper and better than competition. - improving the employees' efficiency and production effectiveness, - together with the lapse of time , improving of effectiveness became more and more expensive and difficult, - competition does exactly the same, and the effect is that all branch leaders stock as in one place. - Cirque du Soleil- the one of Canada's largest cultural exports, - Ford , which reconstructed the industry boundaries of cars and horse-drawn carriages to create a blue ocean. Whichever approach is chosen, a strategy’s success depends on the development and alignment of three propositions: -a value proposition that attracts buyers, - a profit proposition that enables the company to make money out of the value proposition, - a people proposition that motivates those working for or with the company to execute the strategy. Before choosing the right approach Red Oceans - all markets which are already discovered and developed Blue Ocean Strategy - the opposition to Red Ocean, a place where competition became irrelevant. - markets, which are still uncover, - competition is left behind, - in this area take a part the most of business moves, which define nature of the company for many years while ensuring it long - term profits, - no place for competition, setting the game rules itself, - can be discovered also in branch which is already saturated.
Transcript: Conclusion Thank you for your time and attention. Are there any questions? RED ocean Co-director of the INSEAD Blue Ocean Strategy Institute Won several awards Wrote a lot of articles (the Observer) Presentation BLUE ocean Blue Ocean Strategy RED or BLUE International bestseller Sold 2 million worldwide Available in 42 languages Phillips SONY ZARA Gazelle Albert Heijn Renee Mauborgne Presendent Barack Obama´s board of advisor on HBCU´s Won several awards Wrote numerous articles Unexplored territory Competition W. Chan Kim Nintendo WII Apple Cirque du Soleil Starbucks NYPD What is BOS? by Sanjay Bhoep
Transcript: Porters Five Forces 1. Rivalry amoung competiters 2. Threats of new Entrants 3. Bargaining powers of buyers 4. Threats of a substitute product or service. 5. Bargaining power of suppliers SWOT ANALYSIS weaknesses Strengths Threats opprotunities http://www.flatworldknowledge.com/ http://ocw.mit.edu/OcwWeb/home/home/index.htm low percentage % 90% High percentage % service Percentage of book distributed =mount mercy ease of use 10% 30% BLUE OCEAN STRATEGY selection availibility Price KEY 70% = Online quality 100% location subjects = peers 50%
Transcript: Presented by: Demirchyan Levon Gabrielyan Zaruhi Hayrapetyan Astghik Maghakyan Anna Sargsyan Hrayr Torosian Nareh “Competing in overcrowded industries is no way to sustain high performance. The real opportunity is to create blue oceans of uncontested market space.” VI BLUE OCEAN Irrelevant Competition and Uncontested Market Space Focus on Non-Customers Break Value-Cost Tradeoff Pursuit of Differentiation AND Low Cost Align the Whole System of a Firm's in pursuit of Blue ocean creator's business model is easier to imagine than to do. Network externalities: the more customers, the more attractive a company looks. Brand Buzz: High leap in value leads to loyal followers. Brand image conflict prevents companies from imitating a blue ocean strategy. Politics and Culture: Imitation often requires companies to make changes to existing business practices and culture. Horse-drawn carriage buyers value pioneering (some new technology) Globally Available Info. & value pioneering (mostly existing technology) value pioneering (mostly existing technology) RED OCEAN Beat the Competition and Compete in Existing Market Space Focus on Existing Customers Make Value Cost Tradeoff Choice of Differentiation OR Low Cost Protecting Blue Oceans Business Launch Blue Ocean Strategy Key Blue ocean Creations Was it driven by technology pioneering or value pioneering? value pioneering (mostly existing technology) New entrant value pioneering (mostly existing technology) Incumbent Unattractive In less than six years they emerged as the two largest bookstore chains Customers stay longer in shops They create a new customer experience The Idea 1906 There are two ways to create blue oceans New entrant Unattractive Computers The Result Costs Feel Free !!! Competition Four Actions Framework Unattractive At the time of blue ocean creation, was the industry attractive or unattractive? Incumbent value pioneering (some new technology) Incumbent Was the blue ocean created by a new entrant or an incumbent? Was the blue ocean created by a new entrant or an incumbent? The business universe consists of two distinct kinds of space: Red and Blue oceans. Red oceans represent all the industries in existence today-the known market space. Blue oceans denote all the industries not in existence today-the unknown market space,untainted by competition. The defining characteristics value pioneering (mostly existing technology) 03.10.2010 Incumbent At the time of blue ocean creation, was the industry attractive or unattractive? Differentiation Unattractive Unattractive Car buyers 20th Century Was the blue ocean created by a new entrant or an incumbent? Profit Impact Barriers to Imitation Vacuum cleaners need special bags User must buy and change bags Generates additional costs and annoyance To give rise to completely new industries eBay – online auction value pioneering (some new technology) Create an environment Instead of just "buy and go" Focus on customer needs Celebrates learning and reading Redefine the scope of services “Go where Profits and Growth are- and where the competition isn’t “ New entrant Net Worth: $2.5 Bill Fortune: Self Made Source: Cirque du Solei Age: 50 Citizenship: Canada Residence: Montreal Education: NA Marital Status: Divorced, 5 Children Was it driven by technology pioneering or value pioneering? Market share surged from 9% in 1908 to 61% in 1921 1908 - $ 850 1909 - $ 609 1924 - $ 290 Buyer Value The Result Technological Advances Attractive Fallen Trade Barriers Developing Blue Oceans Model T Shifting focus from Customers to Non customers to create new demand Incumbent Key Blue ocean Creations Car in Just 4 Days Vs Industry Norm of 21 Horse-drawn carriage Japanese Companies' Meteoric Rise in the 1970's and 1980's The Problem Aspects of Strategy Was it driven by technology pioneering or value pioneering? “nothing has spread socialistic feeling more than the automobile” Blue Ocean: Not A New Concept The Lowest Cost Structure in the Industry Cars Highly Standardized With Limited Options and Interchangeable Parts Unskilled Laborers Who Worked on One Small Task No more bag changes No more additional costs and annoying circumstances No suction power wasting To create new from within a red ocean, by transforming boundaries of an existing industry. Cirque du Soleil – it made a new and profitable blue ocean from within the red ocean of the circus industry, combining circus and theatre which were traditionally separated. Competitive Advantage Incumbent Blue Ocean Unattractive Incumbent Break the Value Cost Tradeoff Automobiles value pioneering (mostly existing technology) Customers leave directly after purchasing No buying experience Less turnover Thanks For Your Attention ! More than 500 automakers in America Cars that cost around $ 1,500 and are available only to the rich Anti car activities and organized boycotts Horses could easily negotiate the bumps and mud that stymied cars Carriages were much easier to maintain than the luxurious autos
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