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Blue Ocean Strategy

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shuai ma

on 26 November 2014

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Transcript of Blue Ocean Strategy

Background
Summary of the article
The paradox of strategy
4 actions framework
Two different phases of Blue Ocean Strategy
Formulation
Execution
Blue Ocean Strategy vs Traditional competietion
Discussion
Conclusion







Introduction
Background
The difference between BOS and ROS
Red Ocean Strategy
Reconstruct market boundaries
1. Across alternate industry

2. Across strategic groups

3. Across buyer groups

4. Across complementary scope of products and services

5. Across functional
emotional orientation

6. Across time

The example of Air Asia
Across alternative industry
Six Principles of Blue Ocean Strategy
Execution Principles

Air Asia
Blue Ocean Strategy
GBS Student Led Seminar Activity---Group 3
Shuai Ma
Xiaodan Tang
Pham Thi Huyen Phuong

Published in 2005
By W. Chan Kim and Renée Mauborgne
A study of
150 strategic moves
100 years
30 industries
Creating ″blue oceans″ of uncontested market space

Summary of the article
The Paradox of Strategy
Blue oceans are right next to you in every industry
Formulation Principles
1. Reconstruct market boundaries

2. Focus on the big picture, not the numbers

3. Reach beyond existing demand

4. Get the strategic sequence right

5. Overcome key organizational hurdles

6. Build execution into strategy

Break from the competition
and create blue oceans.

The features of conventional Airline:
Fast, Expensive, Better services, Flight connections

The features of coach:
Slow, Cheap, Point to Point

The features of Air Asia:
Price of coach, Speed of Flight,
Point to Point direct flight, No frill user pay,
Budget travel


Eliminate-Reduce-Raise-Create
Eliminate

Reduce
Raise
Create
Blue Ocean Strategy
Focus on competitive position within strategic group



Look across strategic groups within industries


Across strategic groups
Red Ocean Strategy

Low-cost business model
$30/month

Eliminate the luxury facilities
distinctive strengths of two strategies groups:

traditional health clubs
home exercises programs.

Blue Ocean
The difference between BOS and ROS
Red Ocean Strategy
Blue Ocean Strategy
Focus on rivals within its industry

Looks across alternative industry

Across buyer groups
Purchasers:
pay for the product or service

Users:
use the product or service

Influencers:

influence the decision in the purchase.

3 elements will influence the buyer's decisions

Breaks away from the competition

Doctor is the key influence

Patient is the key users

Novo Nordisk
The difference between BOS and ROS
Red Ocean Strategy
Blue Ocean Strategy
Focus on better serving the buyer group and an industry typically concern on a single buyer group

Individual companies in an industry often target different customer segment, and redefines the industry buyer group


Across complementary scope
of products and services
Movie theaters "
The ease
"


Cost of getting a babysitter
Parking the car

The difference between BOS and ROS
Red Ocean Strategy
Blue Ocean Strategy
Focus on maximizing the value of product and service offing within the bounds of its industry


Looks across to complementary products and service offerings


Across functional emotional orientation
Quick Beauty House
vs
Traditional Japanese Haircuts

Eliminates the emotional service such as provide juice and massage, rituals.

Reduces both of the time and the price of haircuts.

Created Blue Ocean by going from emotional to functional.

The difference between BOS and ROS
Red Ocean Strategy
Blue Ocean Strategy
Focuses on improving price performance within the functional-emotional orientation of its industry


Rethinks the functional-emotional orientation of its industry


Across Time

Online Book Store
The difference between BOS and ROS
Red Ocean Strategy
Blue Ocean Strategy
Focuses on adapting to external trends as they occur


Participates in shaping external trends over time

Value Innovation

Cornerstone of blue ocean strategy creating a leap in value for both buyers and the company

Simultaneous pursuit of differentiation and low cost






Buyers value= offering - price
Company value= price - cost


How to break the value-cost trade-off?

Sequence of BOS

Formulating Blue Ocean Strategy
Reach Beyond Existing Demand

The Case of Yellow Tail
Produced by Casella Wine Company

Family business

No.1 wine, USA, 2003

3 Tiers of non-customers
Tier 1
Wine drinker market

Tier 2
"Easy to drink" market Eg., beer, cocktail, soft-drink

Tier 3
Anyone that drinks water

Yellow Tail not only focus on the wine market only but also make it more appealing to the bigger population
Formulation Process
Execution Process
Overcome Key Organization
Hurdles

Old Town White Coffee
Chain Store in Malaysia

Building in 1999

Manufactures instant beverage mixes and products

237 café, Malaysia, Singapore, China

Rightly Priced

Hygienic

Better Environment

Emotional Appeal

Overcome Key Organization Hurdles

E. E. E.
Fair Process
Engagement
Explanation
Expectation
Involving individuals

Asking for input and
allowing refute

Communication and respect
Understand the final decision

Show the consideration

Allows employee to trust managers' intentions

Feedback loop
State the new rules of the game

Knowing how their work will be judged

Penalties for failure

Minimize political jockeying and favoritism

Focus on execution
Traditional Competition
Purpose
-To think competition is the main issue

Why it is useful
-Avoiding bargaining power of buyers
-Substitutes
-Rivalry

Weakness
-Theory
-Limitations of hypotheses

V.S
Blue Ocean Strategy
Discussion and Exercises
Purpose
-To take a view of innovation

Why it is useful
-New market
-Opportunities
-Innovation

Weakness
-Long time to innovate
-Not suit every project

Blue ocean ?
Innovation ?
The results show that blue oceans are
NOT
about technology innovation
Example of Bandit cellphones (no brand)
(Chang, 2010)

Q1. Use the ERRC framework to analyze Starbucks' Blue Ocean strategies
Q2. Can we say that Red Ocean strategies are worthless?
Please take 10 minutes to discuss the above questions
Conclusion
1. BOS is the result of a study of 150 strategic moves across 30 industries over 100 years.

2. BOS is the simultaneous pursuit of differentiation and low cost.

3. The aim of BOS is to create new market space thereby making the competition irrelevant.

4. BOS covers both strategy formulation and strategy execution.

5. The Eliminate-Reduce-Raise-Create framework.

6. 6 aspects of reconstruct market boundaries.

7. Sequences of BOS.

8. 3 tiers of Non-customer groups

9. Fair processes and E.E.E.

10. BOS is not about innovation and ROS still needed.
Yinjing Pei
Yuan Sun
Qianhui Zhu

ROS & BOS

The case of Cirque du Soleil

BOS findings

BOS brings barriers to imitation.

How to achieve a maximum result?
A quick refresher
ROS
: Existing market has advantages, but has lots of competition.

BOS
: Although lacks of competition, new market needs a long time to make innovation.



1. Run into the Red Ocean, in order to get more consumers and capitals. Also, strength the position in the existing market.

2. Because firm gained enough resources and capitals, they can then run into Blue Ocean. They have resources to make innovation.

References
Kim C, Yang K H, Kim J., 2008. A strategy for third-party logistics systems: a case analysis using the blue ocean strategy[J]. Omega, 36(4), pp.522-534.

Kim, W. Chan; Mauborgne, Renée. Harvard Business Review. Oct2004, Vol. 82 Issue 10, p76-84.

Chang, S. 2010. "Bandit cellphones: A blue ocean strategy", Technology in Society, 32(3), pp. 219-223.

Faruque, S. (Ed.). (2012, October 1). Blue Ocean Strategy and Starbucks. Retrieved November 26, 2014, from http://www.slideshare.net/Samforester/blue-oceanstrategy-and-starbucks

Blue Ocean Strategy (2014). The book. [online]. Retrieved November 26, 2014, from, http://www.blueoceanstrategy.com/book/

Yellow Tail. (2014). [online]. Last updated 25 November. http://www.yellowtailwine.com/our-story/

Old Town White Coffee. (2014). [online]. Last updated 25 November. http://www.oldtown.com.my/index.php/business/distribution/






The case study of Cirque du Soleil
Found in 1984

Toured more than 100 cities

More than 50 million viewers

$620 million annual revenues

4 Actions Framework (ERRC)
Eliminated
-Many of the rules/criteria in the industry

Reduced
-Focus on some of the rules below industry standard

Raised
-Focus on some of the rules above industry standard

Created
-A new rules of their own

Southwest Airlines
So, is ROS worthless?
NO!
A company must master its traditional markets using ROS and panning tools.

It is necessary to swim successfully in the red ocean by out competing rivals.

To sustain high performance, companies must create their own blue oceans and make the competition irrelevant.
1.Limited principles to effectively manage risks.

2. No guideline can be followed in uncontested market space.

3. Marketing is the key factor that determines the success of any blue ocean strategy.

4. Value alone doesn't build brands.
literature review
Full transcript