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Blue ocean strategy

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Blue ocean strategy

  1. 1. Red Ocean: Why Do the industries name the red ocean? The known market space which include the all existing industries as off now. Boundaries of these market is defined and where competitors have accepted competition rules. Where number of customers are fixed and customers expectations is also fixed. Industries accept underlaying boundaries, do not questions market scenario. They fix their market as others, They accept strategies an generally, Normally focus on same key targets, offer services and goods as offered by their competitors and offer same time line in formulating strategy. As per authors research shows that 86 percent of the new venture generated 62 percent of the total revenues and 39 percent of total profits. Similarly only 14 percent of the launches were focused on new business opportunities and created blue oceans. These launches generated 28 percent of revenues and 61 percent of total profits. Looking in to the results show that performance can be increased by creating blue ocean. 39 62 86 61 38 14 0 10 20 30 40 50 60 70 80 90 100 Profit Impact Revenue Impact Business Launch The Profit and Growth Consequences of Creating Blue Oceans Red Ocean Blue Ocean
  2. 2. Value Innovation: The Cornerstone of Blue Ocean Strategy. The main focus of the strategy is to eliminate the existing market competition, by creating value innovation. Value innovation make company's position favorable to cost and value proposition to byers. Buyers value can be lifter by offering valuable means that never offered earlier. So simultaneously value for buyers to be increase along with cost reduction. Cost VI Buyer Value Value Innovation Blue Ocean Strategy Eliminate Reduce Raise Create On one hand the value to the company is based on its cost structure and the price for the product. On the other hand the value to the buyers is determined by the price and the utility of the company’s offering.
  3. 3. Strategy Canvas: Strategic Canvas is a diagnostic tool and action framework both. Companies current position or situation in market is describe, first. Two axis represent Range of factors (Horizontal) competing or investing in, and second is level of value offered (Vertical). By plotting every factors with variable conditions, it reveals relative performance in its relevant market. Value curve need to be set in relation with current situation of the company within the market for getting qualitative results. • Company fit in blue ocean strategy – When a ventures curve is meeting the all criteria of blue ocean strategy. Value speak to the customers. • A company caught in the red ocean - When a company’s value curve converges with its competitors than the company is acting on a red ocean. • Overdeliver without payback - When all factors are on high level. • An incoherent strategy - When a venture value curve can be described as ‘low-high-low-low-high’ – it signals that the company does not have any coherent strategy. • Strategic contradictions – Only considering higher value over other factors.
  4. 4. Southwest Airlines focuses with their new value curve on the factors ‘friendly service’, ‘speed’ and ‘frequent point-to point departures’. On the other side the factors ‘price’, ‘meals’, ‘lounges’, ‘seating class choices’ and ‘hub connectivity’ were reduced. The company created a blue ocean by giving the customer the possibility to use a high speed transport with frequent departures and attractive prices. To achieve this, Southwest Airlines eliminates and reduces several variables used as competition factors within the industry and declares them irrelevant for their new target group of customers, in order to reallocate their resources into the new focus. Example of Southwest Airlines: Regarding the strategic profile of Southwest Airlines it illustrates it different value curve compared to the average airlines in the US and to the alternative way to travel: car transport (figure 4-4).
  5. 5. Four Actions Framework: It is always necessary to answer following four key questions to evaluate business model. Eliminate – Which of the factors that the industry takes for granted should be eliminated? Reduce – Which factors should be reduced well below the industry’s standard? Raise – Which factors should be raised well above the industry’s standard? Create – Which factors should be created that the industry has never offered? Which factors should be reduced well below the industry’s standard? Luggage Transport, Services, Meal Which factors should be raised well above the industry’s standard? Frequency of flight, Number of Destinations Which factors should be created that the industry has never offered? New Services, New-Check in Method, New Distribution way, New Type of Transport Which of the factors that the industry takes for granted should be eliminated? Meal, Drinking, free Magazine The Four Actions Framework of ‚Southwest Airlines’ Reference for PPT:- Siegemund, Carsten. Blue Ocean Strategy for small and mid- sized companies in Germany : Development of a consulting approach, Diplomica Verlag, 2008. ProQuest Ebook Central, http://ebookcentral.proquest.com/lib/globalnxt- ebooks/detail.action?docID=594363.

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