Recent trends in Business strategy-Dr.Kabaly P Subramanian

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  • Red oceans (or known market space):
    Red ocean refers to a saturated market where there is fierce competition, already crowded with people providing the same type of services or producing the same kind of goods.

    Blue oceans (or unknown market space):
    Blue oceans are untapped and uncontested markets, which provide little or no competition for anyone who would dive in, since the markets are not crowded.


    At the end of the day, the question is Do you want to compete in crowed markets or to create and capture new market space and new demand?
    Lack of slack – overcrowded market
  • Red oceans (or known market space):
    Red ocean refers to a saturated market where there is fierce competition, already crowded with people providing the same type of services or producing the same kind of goods.

    Blue oceans (or unknown market space):
    Blue oceans are untapped and uncontested markets, which provide little or no competition for anyone who would dive in, since the markets are not crowded.


    At the end of the day, the question is Do you want to compete in crowed markets or to create and capture new market space and new demand?
  • Recent trends in Business strategy-Dr.Kabaly P Subramanian

    1. 1. Recent Trends in Business Strategy By Dr. Kabaly P Subramanian Department of Business Studies Arab Open University Sultanate of Oman
    2. 2. Words of wisdom “The competitor to be feared is one who never bothers about you at all, but goes on making his own business all the time” Henry Ford
    3. 3. Words of wisdom “It is not the strongest of the species that survive, or the most intelligent, but it is the one most capable of change” Charles Darwin
    4. 4. Words of wisdom “The reasonable man adapts himself to the conditions that surround him. The unreasonable man adapts surroundings to himself. All progress depends on the unreasonable man” George Bernard Shaw
    5. 5. Why do you need to sit through this presentation?  Today’s Challenge : Building organizations that can grow in the world of relentless change and ferocious competition  Survival vs Growth  New thinking in strategy helps you to grow  Easy to understand and apply  Organizations, Nations and Individuals
    6. 6. Multiplicity of explanations  The multiplicity of explanations and prescriptions only shows the complexity of strategic management.  These explanations and prescriptions are not always mutually exclusive  The Manager’s task is to find how these insights combined to build a multidimensional and flexible strategy that is robust to the different assumptions and explanations
    7. 7. Multiplicity of explanations  These explanations and prescriptions can sensitize managers to the different factors they must consider, but cannot provide ready-made and standardized solutions for them to adopt.
    8. 8. BOS  This is a program for managers in search of a practical roadmap to tackle strategic innovation in a systematic and systemic way.
    9. 9. Structure of this presentation  Common understanding on Business Strategy  Video case : 1 To understand the traditional approach to strategy.  Video case : 2 To understand the new approach to strategy  Explanation of this new thinking using Blue Ocean Strategy ( BOS ) principles ,tools and frameworks
    10. 10. Strategy  Sustainable Competitive Advantage  Strategy is about organizational change “A set of decisions and actions leading to sustainable competitive advantage of organizations/firms/businesses”.
    11. 11. Traditional approach to Strategy making  analyzing the industry or environmental conditions in which they operate.  assess the strengths and weaknesses of the players they are up against.  With these industry and competitive analyses in mind, they set out to carve a distinctive strategic position where they can outperform their rivals by building a competitive advantage  chooses either to differentiate itself from the competition for a premium price or to pursue low costs  aligns its value chain accordingly, creating manufacturing, marketing, and human resource strategies in the process.  On the basis of these strategies, financial targets and budget allocations are set.
    12. 12. Logic behind this traditional approach  company’s strategic options are bounded by the environment  Structure shapes strategy  This “structuralist” approach, which has its roots in the structure-conduct -performance paradigm of industrial organization economics . (See Industrial Market Structure and Economic Performance, F. M. Sherer ,Chicago:Rand McNally, 1970)
    13. 13. Essence of Traditional approach to strategy Compete in existing market space. Beat the competition. Exploit existing demand. Make the value-cost trade-off. Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost.
    14. 14. Result  Stiff Competition  Thin Margin  Low growth  Surviving
    15. 15. 15 Red Ocean markets.... Blue Ocean Strategy Regional Centre 15
    16. 16. Business History  Business history reveals plenty of cases in which firms’ strategies shaped industry structure, from Ford’s Model T to Nintendo’s Wii.  Blue ocean strategy (a new theory of strategy) reflects the fact that a company’s performance is not necessarily determined by an industry’s competitive environment.
    17. 17. Roots of Blue Ocean Strategy  The Blue ocean strategy framework can help companies systematically reconstruct their industries and reverse the structure-strategy sequence in their favor.  Blue ocean strategy has its roots in the emerging school of economics called endogenous growth whose central paradigm posits that the ideas and actions of individual players can shape the economic and industrial landscape. In other words, strategy can shape structure  We call this approach “reconstructionist.”
    18. 18. Reconstructionist approach  Reconstructionist : based on endogenous growth, which traces back to Joseph A Schumpeter's initial observation that the forces that change economic structure and industry landscapes can come from within the system.  Schumpeter argues that innovation can happen endogenously and the main source is the creative entrepreneur. (Steve Jobs, Karsanbhai Patel, C.K.Rajkumar, Jeff Bezos, Mark Zuckerberg, Henry Ford, Herb Kelleher, Anita Roddick, Akio Morito,Mohammed Yunus,…)
    19. 19. Red Ocean markets.... Blue Ocean markets.... 19 Blue Ocean Strategy Regional Centre
    20. 20. Structuralist vs Reconstructionist  While the structuralist approach is valuable and relevant, the reconstructionist approach is more appropriate in certain economic and industry settings.  today’s economic difficulties have heightened the need for a reconstructionist alternative.
    21. 21. How to approach?  The first task of an organization’s leadership, therefore, is to choose the appropriate strategic approach in light of the challenges the organization faces.  need to make sure that their organizations are aligned behind it to produce sustainable performance
    22. 22. What is the right approach for you? There are three factors that determine the right approach:  structural conditions in which an organization operates,  its resources and capabilities,  and its strategic mind-set.
    23. 23. Choosing the right approach A structuralist approach is a good fit when A reconstructionist approach is a good fit when Structural conditions are attractive and the organization has the resources and capabilities to build a distinctive position Structural conditions are attractive but players are well-entrenched and the organization lacks the resources or capabilities to outperform them Structural conditions are less than attractive but the organization has the resources and capabilities to outperform competitors Structural conditions are unattractive and they work against an organization irrespective of its resources and capabilities The organization has a bias toward defending current strategic positions and a reluctance to venture into unfamiliar territory The organization has an orientation toward innovation and a willingness to pursue new opportunities
    24. 24. Why should we consider “Blue Ocean Strategy”?  Many companies finds it useful (Samsung)  Countries like Malaysia, Singapore uses this approach for planning their future.  Many strategy experts accepts BOS as an innovative approach (Walter Kiechel ,2010)  Blue-ocean strategy ,work of Kim and Mauborgne is probably the leading contender for Biggest New Idea in Strategy (Walter Kiechel,2010).  The Authors figure in the 2nd place : 2011 Thinkers 50  Research evidence
    25. 25. Origin of Blue Ocean Strategy  15 years of research, 150 strategic moves spanning 100 years, thirty industries (Kim and Mauborgne,2005)
    26. 26.  ENTERTAINMENT SECTOR
    27. 27. Entertainment Sector (1984) CIRCUS VIDEO GAMES THEATRE TELEVISION BEACHES PARKS LIVE BANDS MUSIC SHOWS GAMES BALLET MOVIES ? THEME PARKS SHOPPING MALLS ?
    28. 28. Circus Industry (1980’s) Ringling Brothers Barnum and Bailey Small time circus- 3 Small time circus- 1 Small time circus- 2 ?
    29. 29. Small time circus
    30. 30. Big time circus ( Ringling Brothers)
    31. 31. Video:1
    32. 32. Is it easy?  Is it easy to achieve sustainable high performance?
    33. 33. It is not…  Stiff competition  Costs escalates  Thin profit margin  Low growth
    34. 34. Capturing existing strategy of competitors Ringling Brothers Smaller Regional Circus hi offering level lo Price Multiple Show Animal Shows Thrills & Danger Arenas Aisle Concessions Fun & Humor Unique Venue Star Performers © Kim & Mauborgne 2006
    35. 35.  What is the approach behind this strategy?
    36. 36. It is all in “Thinking” or “Mental Models” (Industry Mindset)  Circus is for Children  Circus should offer animal act  Increase the value (more animal shows, more popular performers,..)  Decrease the value (less animal shows, less popular perfomers)
    37. 37. Cirque Du Soleil (CDS)
    38. 38. Cirque Du Soleil (CDS)  Started in 1984 by a group of street performers.  40 million people,90 countries  In less than 20 years CDS has achieved a level of revenues that took Ringling brothers (the global champion of circus industry) more than one hundred years to attain.
    39. 39. Cirque Du Soleil’s (CDS) offering (Video 2)
    40. 40. How CDS identified and captured Blue Ocean?
    41. 41. Deciding to Move from Known to Unknown market space Known Market Space : Circus ( 1984 ) Unknown Market Space : To be named ( 1984 ) Ringling Brothers Barnum and Bailey Small time circus-3 Small time circus-1 Small time circus-2 ? Cirque Du Soleil (CDS)
    42. 42. Capturing the existing strategy of competitors Ringling Brothers Smaller Regional Circus hi offering level lo Price Multiple Show Animal Shows Thrills & Danger Arenas Aisle Concessions Fun & Humor Unique Venue Star Performers © Kim & Mauborgne 2006
    43. 43. Looking across alternative industries  Theatre  Ballet  Music
    44. 44. Looking across the Customer to Non-Customers  From children to adults to corporate customers  Segmentation to counter segmentation
    45. 45. Value Innovation Eliminate Star performers Animal shows Aisle concession sales Multiple show arenas Raise Unique venue Reduce Fun and humor Thrill and danger Create Theme Refined environment Multiple productions Artistic music and dance
    46. 46. Strategy of CDS Ringling Brothers Smaller Regional Circus hi offering level lo Price Multiple Show Animal Shows Thrills & Danger Arenas Aisle Concessions Fun & Humor Unique Venue Star Performers Theme Cirque du Soleil Multiple Productions Refined Viewing Environment Artistic Music & Dance © Kim & Mauborgne 2006
    47. 47. Finally, Innovated for Value
    48. 48. How to move into uncontested market space systematically?  Stage 0 : Deciding to move into the uncontested market space  Stage 1 : Visual Awakening  Stage 2 : Visual Exploration  Stage 3 : Visual Strategizing  Stage 4 : Visual Communication
    49. 49. Stage 0 : Deciding to Move from Known to Unknown market space Known Market Space : Circus ( 1984 ) Unknown Market Space : To be named ( 1984 ) Ringling Brothers Barnum and Bailey Small time circus-3 Small time circus-1 Small time circus-2 ? Cirque Du Soleil (CDS)
    50. 50. Stage:1 Visual awakening  Compare your business with your competitors by drawing your “as is” strategy canvas.  See where your strategy needs to change
    51. 51. Stage : 1 Visual Awakening ( As is Strategy Canvas ) Ringling Brothers Smaller Regional Circus hi offering level lo Price Multiple Show Animal Shows Thrills & Danger Arenas Aisle Concessions Fun & Humor Unique Venue Star Performers © Kim & Mauborgne 2006
    52. 52. Stage : 2 Visual exploration  Go into the field to explore the six paths to create blue oceans  Observe the distinctive advantages of alternative products and services.  See which factors you should eliminate,create,reduce or raise
    53. 53. Stage : 2 Visual Exploration challenge the boundaries of your industry using the “Six Paths” framework The “Six Paths” show six systematic patterns for reconstructing market boundaries that have general applicability across industry sectors To Creating Across From Competing Within Industry Strategic group Buyer group Scope of product or service offering Functional-emotional orientation of an industry Time 2 11 © Kim & Mauborgne; © UCSI Blue Ocean Strategy Regional Centre. All Rights Reserved.
    54. 54. Four Actions framework Which factors should be reduced well below the industry standard Which of the factors that the industry takes for granted should be eliminated? Which factors should be raised well above the industry’s standard? Which factors should be created that the industry has never offered A new value
    55. 55. ERRC Grid (example) Eliminate Star performers Animal shows Aisle concession sales Multiple show arenas Raise Unique venue Reduce Fun and humor Thrill and danger Create Theme Refined environment Multiple productions Artistic music and dance
    56. 56. 3.Innovated for Value
    57. 57. Stage : 3 Visual Strategizing  Draw your “to be strategy canvas based on insights from field observations  Get feedback on alternative strategy canvases from customers,competitiors’ customers and non customers.  Use feedback to build the best “to be” future strategy
    58. 58. The Strategy Canvas of Cirque du Soleil (To be) Ringling Brothers Smaller Regional Circus hi offering level lo Price Multiple Show Animal Shows Thrills & Danger Arenas Aisle Concessions Fun & Humor Unique Venue Star Performers Theme Cirque du Soleil Multiple Productions Refined Viewing Environment Artistic Music & Dance © Kim & Mauborgne 2006
    59. 59. Reaching beyond existing demand is key to create new market space • To generate the greatest demand, companies should challenge two conventional company practices: the focus on existing customers and the drive for finer segmentation. • To maximize the size of their blue oceans, companies need to take a reverse course: instead of concentrating on customers, they need to look to noncustomers and instead of focusing on customer differences, they need to build on powerful commonalities in what buyers value. • Although the universe of noncustomers typically offers big blue ocean opportunities, few companies have good insight into who noncustomers are and how to unlock them. • To convert this latent demand into a real one, companies need to deepen their understanding of the universe of noncustomers. 10 The Three Tiers of Noncustomers © Kim & Mauborgne; © UCSI Blue Ocean Strategy Regional Centre. All Rights Reserved.
    60. 60. Stage 4 : Visual Communication  Distribute your before-and-after strategic profiles on one page for easy comparison  Support only those projects and operational moves that allow your company to close the gaps to actualize the new strategy
    61. 61. How can we be sure of the existence of a Blue Ocean (uncontested market space)?  History  Blue ocean opportunities have been out there.  As they are explored, market universe has been expanding.
    62. 62. Blue Oceans have continuously been created over time… Palace Theatre (NY 1920) 62 1920s 1980s 2000s 2010 Blue Ocean Strategy Regional Centre Cirque du soleil Wii (Nintendo) Samsung 3D TV Model T (Ford) [Yellow Tail] Southwest Airlines NTT DoCoMo’i-mode Real-time news (CNN) Curves Computing Tabulating Recording Corporation iPad (Apple)
    63. 63. § There is no such thing as a permanently great company, nor a permanently great industry. But there are permanently great strategic moves… 63 Blue Ocean Strategy Regional Centre
    64. 64. Red Ocean based logic vs. Blue Ocean based logic Red Ocean approach Blue Ocean approach Compete in existing market space. Create uncontested market space. Beat the competition. Make the competition irrelevant. Exploit existing demand. Create and capture new demand. Make the value-cost trade-off. Break the value-cost trade-off. Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost. Align the whole system of a firm’s activities in pursuit of differentiation and low cost.
    65. 65. Launches with Red versus Blue oceans 86% 14% Business Launch Revenue Impact Profit Impact 62% 38% 39% 61%
    66. 66. BOS Tools  Strategy Canvas  Four actions framework  ERRC grid
    67. 67. Benefits of strategy canvas  Capture self and competitors strategy  Identify value innovation opportunities  Communicate your strategy to your stakeholders.
    68. 68. Benefits of Four actions framework  Guiding framework which forces you to determine the value adding and non-value adding activities. Also to help you question the industry assumptions. It provides a compelling reason to innovate.
    69. 69. Benefits of ERRC grid  Pushes you to simultaneously pursue differentiation and low costs.  Helps in avoiding over engineering products and services.
    70. 70. BOS tool set  Value Innovation  Strategy Canvas  Four Actions framework  ERRC Grid  Three Characteristics of a good strategy  Six paths framework to reconstruct market boundaries  Four steps of visualizing strategy  PMS Map  Three tiers of Noncustomers  Buyer utility map  Blue Ocean Idea index  Tipping point leadership  Three E principles of Fair process.
    71. 71. Reference  Understanding Strategic Management (2nd edition),Anthony E Henry, Oxford University Press,2011.  Blue Ocean Strategy W.Chan Kim and Renee Mauborgne Harvard Business School Press (2005)  world wide web
    72. 72. Reference  Blue Ocean Strategy W.Chan Kim and Renee Mauborgne  world wide web
    73. 73. kabaly@aou.edu.om

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