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Red Ocean vs. Blue Ocean <ul><li>Ingredients </li></ul><ul><li>An open mind </li></ul><ul><li>Untouched Market (Blue Ocean...
The Six Principles of Blue Ocean Strategy Formulation Principle Reconstruct market boundaries Focus on the big picture, no...
A new Value Curve Companies should eliminate  factors that cut into value or  cut into profit.  Reduce Reduce factors that...
The Eliminate-Reduce-Raise-Create Grid Example: Safeway Description: It helps companies have a clear and better drive  to ...
The Four Steps of Visualizing Strategy Visual Exploration Visual Strategy Fair Visual Communication After the visual strat...
The Three Tiers of Noncustomers Your Market First Tier These customers are always searching for something better.  Second ...
The Buyer Utility Map Description and Function Helps managers look at the issue from the right perspective. Outlines all t...
The Buyers Experience Cycle Purchase Price, how long does it take to find ,how secure is it. Delivery How long does it tak...
Mark Lalic Com 459  source:  Kim, W.C., Mauborgne, R. (2005).  Blue Ocean Strategy.  Boston, Ma: Harvard Business School P...
Price Corridor of  The Mass High Level pricing  – high degree of  legal and resource protection. Difficult to imitate. Mid...
The Profit Model of Blue Ocean Strategy The Strategic Price The Target Profit The Target Cost Streamlining and Cost Innova...
Blue Ocean Idea (BOE) Index Description Companies should build their Blue Ocean based on  the sequence of utility, price, ...
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Com 459 Hw Blue Ocean Strategy

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Transcript of "Com 459 Hw Blue Ocean Strategy"

  1. 1. Red Ocean vs. Blue Ocean <ul><li>Ingredients </li></ul><ul><li>An open mind </li></ul><ul><li>Untouched Market (Blue Ocean) </li></ul><ul><li>Risk Takers </li></ul><ul><li>TALENT </li></ul>Description Blue Ocean refers to the meaning of opening up a market that has not been touched upon yet. This technique is heavily influenced by innovation and is aimed at making competition irrelevant. Red Ocean describes the meaning of opening up a market that is just the same as all the rest, therefore engaging in fierce and unnecessary competition. Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press Align the whole system of a firm’s activities in pursuit of differentiation an low cost. Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost. Break the value to cost trade off. Make the value to cost trade off. Create and capture new demands through innovation and change. Exploit customers or the markets current demands. Competition is irrelevant. Competing and trying desperately to eliminate the competition. Creating a business in an untouched market space. Opening up a business in an already competitive market space. Blue Ocean Red Ocean
  2. 2. The Six Principles of Blue Ocean Strategy Formulation Principle Reconstruct market boundaries Focus on the big picture, not the numbers Reach beyond the existing demand Get the strategic sequence right Execution Principle Overcome key organizational hurdles Build execution into strategy Risk factor each principle attenuates Search risk Planning risk Scale risk Business model risk Risk factor each principle attenuates Organizational risk Management risk All LOW risk All LOW risk Why all the low risks? Because it is a Blue Ocean of unmarked market places Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press
  3. 3. A new Value Curve Companies should eliminate factors that cut into value or cut into profit. Reduce Reduce factors that are too high above the industries standard. Eliminate Examples could be factors that Industries constantly compete on such as constant new product development. Some industry standards that cut into company productivity and can be reduced is customer service standards. Create What type of products or services can be created that is not offered within the industry. For example grocery stores can focus on providing an effective home delivery service. Raise What factors can be raised above the industries standards. Companies should focus on ways they can change the sources of value for buyers. Ingredients A smooth flow of communication throughout the company Willingness to change. The ability to use effective rational and critical thinking. The Four Actions Framework Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press
  4. 4. The Eliminate-Reduce-Raise-Create Grid Example: Safeway Description: It helps companies have a clear and better drive to creating Blue Oceans. The grid helps companies with four immediate benefits. 1. It pushes them to push for differentiation to break the value-cost trade-off. 2. Stops companies from over engineering products. 3 Easy to understand by managers 4. Because it is a difficult it drives companies to scrutinize every factor in the industry. Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press Create Better work environment More dairy product selection Communication between management and Employees. Reduce Store Shrink Customer Complaints Worker Complaints Raise Worker Pay Store Morale More workers for certain shifts Eliminate Over achieving customer service. Worker abuse Store Manager
  5. 5. The Four Steps of Visualizing Strategy Visual Exploration Visual Strategy Fair Visual Communication After the visual strategy is realized communicate it effectively and easily to your Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press Allow all your teams to gather together and share their illustrations of the canvas strategies that they created. Nothing will bring change more than visual realization. Managers should go out into the field and explore the six different fields of creating blue oceans. As how painters never let someone else paint for them, managers should never out source their eyes. Organize a team and draw up your companies value curve using the strategy canvas. Visualizing the changes needed will bring executives to act on it. Visual awakening
  6. 6. The Three Tiers of Noncustomers Your Market First Tier These customers are always searching for something better. Second Tier Also known as refusing noncustomes they find the offerings of markets Unacceptable or beyond their means. Customers are on the edge ready to jump ship if a better market arrives. An Ocean of untapped demand waiting to be released. Third Tier Farthest away from an Industries existing customers. Their needs are always assumed to belong to other markets. Unlimited potential if needs are met Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press
  7. 7. The Buyer Utility Map Description and Function Helps managers look at the issue from the right perspective. Outlines all the levers companies can pull to deliver exceptional utility to buyers. Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press Environment Friendly Fun and image Risk Convenience Simplicity Customer Productivity 6. Disposal 5. Maintenance 4. Supplements 3. Use 2. Delivery 1. Purchase
  8. 8. The Buyers Experience Cycle Purchase Price, how long does it take to find ,how secure is it. Delivery How long does it take, how easy is it, is it difficult to unpack. Use Is it easy to use, does It require training, does it deliver far more power than the average product. Supplements Do you need other products, is it costly, how easy is it to obtain. Maintenance How easy is it to upgrade and maintain the product. Is it costly Disposal Does the product create waste items, are there environmental issues, is disposal costly. Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press
  9. 9. Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press
  10. 10. Price Corridor of The Mass High Level pricing – high degree of legal and resource protection. Difficult to imitate. Mid Level pricing – Some degree of legal and resource protection. Low Level pricing – Low degree of legal and resource protection. Easy to imitate. The Price Corridor of the Mass Description: The table is used to help managers find the right price for an irresistible offer. The irresistible offer may not always be the lowest price. Step 1: Identify the price corridor of the mass. Step 2: Specify a price level within the price corridor. Same Different Form Different Form and function Form Same Function Same Objective Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press
  11. 11. The Profit Model of Blue Ocean Strategy The Strategic Price The Target Profit The Target Cost Streamlining and Cost Innovations Pricing Innovation Partnering Key Lever Key Lever Key Lever To hit the target cost that supports the profit companies have two key levers. Companies turn to the third lever When all else fails and target cost cannot be met. Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press
  12. 12. Blue Ocean Idea (BOE) Index Description Companies should build their Blue Ocean based on the sequence of utility, price, cost, and adoption. The BOI provides a simple test or checklist to help ensure commercial success. Mark Lalic Com 459 source: Kim, W.C., Mauborgne, R. (2005). Blue Ocean Strategy. Boston, Ma: Harvard Business School Press + +/- - Adoption Have you addressed adoption hurdles up front? + - - Cost Does you cost structure meet the target cost? + - - Price Is your price easily accessible to the mass buyers? + - - Utility Is there exceptional utility? Are there compelling reasons to buy your offering? DoCoMo I-mode japan Motorola Iridium Philips CD-i
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