Final Draft-Blue Ocean Strategy Project

Academic supervisor: Ranganai. J (Mr.)
By
Moyo Tendai (P0114310F)

An investigation into the sustainability of Blue Ocean Strategy as a business-level strategy in Zimbabwe April 24, 2015
National University of Science and Technology |Bachelor of commerce Honors Degree in Management 2
TABLE OF CONTENTS
Project Title Form 11
Declaration of Originality 12
Copyright Declaration 13
Project Release Form 14
Grand Theme 15
Dedication 16
Acknowledgements 17
Abstract 18
Definition of key Terms and acronyms 20
CHAPTER 1: GENERAL INTRODUCTION 21
1.0 Introduction 21
1.1 Background to the study 21
1.2 Statement of the problem 23
1.3 Objectives of the study 24
1.3.1 Research questions 25
1.3.2 Statement of Hypotheses 25
1.4 Significance of the study 26
1.4.1 Theoretical significance 26
1.4.2 Significance to the researcher 26
1.4.3 Significance to Zimbabwean Companies 27
1.5 Assumptions of the study 27
1.6 Delimitation 28
1.7 Limitations 29
1.8 Project structure 30

1.9 Chapter conclusion 31
CHAPTER 2: LITERATURE REVIEW 32
2.0 Introduction 31
2.1 Strategy 31
2.2 The origin of strategy 36
2.3 Strategy anatomy 36
2.3.1 Corporate level strategy 38
2.3.2 Business level strategy 39
2.4 The outside – in perspective 39
2.5 The inside-out perspective 50
2.5.1.0 Total Quality and Customer Value Strategy 51
25.1.1 Best net value 51
2.5.2 Blue Ocean strategy 53
2.5.2.1 Creation of blue oceans 53
2.5.2.2 New market space 55
2.5.2.3 The impact of creating blue oceans 56
2.5.2.4 The rising imperative for creating blue oceans 56
2.5.2.5 The heart of Blue Ocean Strategy: value innovation 57
2.5.2.6 Red Ocean versus Blue Ocean Strategy 59
2.6 Formulating and executing Blue Ocean Strategy 61
2.6.1 The six principles of Blue Ocean Strategy 62
2.6.2 Analytical tools and frameworks 62
2.6.2.1 The strategy canvas 63
2.6.2.2 The four actions framework 64
2.6.2.3 The Eliminate-Reduce-Raise-Create Grid 66

2.7 Formulating Blue Ocean Strategy 67
2.7.1 Reconstruction of market boundaries 67
2.7.1.1 The six-path framework 68
2.7.2 Focusing on the big picture, not numbers 70
2.7.2.1 Visualizing strategy 70
2.7.2.2 The Pioneer-Settler-Migrator Map 72
2.7.3 Reach beyond existing demand 74
2.7.4 Getting the strategic sequence right 76
2.7.4.1 The Price Corridor of the Mass 81
2.8 Executing Blue Ocean Strategy 83
2.8.1 Overcoming key organizational hurdles to strategy execution 83
2.8.1.1 The Cognitive hurdle 84
2.8.1.2 The Resource hurdle 84
2.8.1.3 The Motivational 85
2.8.1.3 The Political hurdles 87
2.8.2 Challenging conventional wisdom 87
2.8.2.1 The Four Pillars of Blue Ocean Leadership 89
2.8.3 Build execution into strategy 90
2.9 The sustainability and renewal of Blue Ocean Strategy 92
2.9.1 Barriers to imitation 92
2.9.2 When to Value-innovate again 92
CHAPTER 3: RESEARCH METHODOLOGY 94
3.0 Introduction 94
3.1 Research philosophy 94

3.1.1 Research approach 95
3.1.2 Research paradigm 95
3.2 Research design 96
3.2.1 Research strategy 97
3.3 Data sources 98
3.3.1 Secondary data 98
3.3.2 Primary data 99
3.4 Data collection techniques 101
3.4.1 Questionnaire 101
3.4.2 Semi-structured interview 102
3.5 Data collection procedure 103
3.5.1 Sample design 103
3.5.2 General and target population 104
3.5.3 Sample frame 104
3.5.4 Sample size determination 104
3.5.5 Sampling methods and techniques 105
3.5.5.1 Quota sampling 105
3.5.5.2 Purposive Sampling 106
3.6 Data Presentation 107
3.7 Data analysis 107
3.7.1 Quantitative analysis 108
3.7.2 Qualitative analysis 108
3.8 Validity and Reliability considerations 108
CHAPTER 4: DATA PRESENTATION AND ANALYSIS 110

4.0 Introduction 110
4.1 Interview Response Rate Analysis 110
4.2 Data Presentation and Analysis 111
4.2.1 Sustainability of Blue Ocean Strategy 111
4.2.2 Marginal Benefits of Blue Ocean Strategy 114
4.2.3 Blue Ocean as a winning strategy 115
4.2.4 Comparison of Red Oceans to Blue Oceans 119
4.2.5 Long-term survival and going concern mechanisms 122
4.3 Chapter Conclusion 130
CHAPTER 5: SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
5.0 Introduction 131
5.1 Recap of Objectives 131
5.2 Summary of Findings 132
5.2.1 Sustainability of the Blue Ocean Strategy framework as a business-level strategy132
5.2.2 Viability of Blue Ocean Strategy as a business-level strategy 133
5.2.3 Marginal benefits of Blue Ocean Strategy relative to the cost of adoption in the
Zimbabwean economic context 135
5.2.4 Comparison of Red Oceans to Blue Oceans 136
5.2.5 Long-term survival and going concern mechanisms for Blue Ocean Strategy 137
5.3 Conclusion 138
5.4 Recommendations 139
5.5 Trail for future Research 140
5.6 Concluding Remarks 140
REFFERENCES 141

APPENDICES 145
Appendix 1 – Questionnaire/Interview Guide 145
Appendix 2 – Formulae used by the researcher 149

LIST OF FIGURES
Figure 2.1 Strategy Anatomy 37
Figure 2.2 Strategy Content 38
Figure 2.3 Business Level Strategy 40
Figure 2.4 Porter‘s Generic Strategies 41
Figure 2.5 Overall Cost Leadership 43
Figure 2.6 Overall Differentiation 46
Figure 2.7 The Value Inequality Model 52
Figure 2.8 Industry Attractiveness Assessment Model 54
Figure 2 .9 The Cornerstone Of Blue Ocean Strategy 58
Figure 2.10 Value Innovation 58
Figure 2.11 Red Ocean versus Blue Ocean Strategy 60
Figure 2.12 The Strategy Canvas 63
Figure 2.13 The Four Actions Framework 64
Figure 2.14 The Eliminate-Reduce-Raise-Create Grid 66
Figure 2.15 The Six-Path Framework 68
Figure 2.16 The Visualization Process 71
Figure 2.17 The Pioneer-Settler-Migrator Map 72
Figure 2.18 The Boston Matrix 73
Figure 2.19 The Three Tiers of Noncustomers 75
Figure 2.20 The Sequence Of Blue Ocean Strategy 78
Figure 2.21 Buyer Experience Cycle/Buyer Utility Map 79
Figure 2.22 The Price Corridor Of The Mass 81

Figure 2.23 the Four Hurdles To Execution 83
Figure 2.24 Conventional Wisdom versus Tipping Point Leadership 88
Figure 2.25 The Fair Process 91
Figure 4.1 Respondents‘ Opinions on the Sustainability of Blue Ocean Strategy 112
Figure 4.2 Viability of Blue Ocean Strategy in Zimbabwe 116
Figure 4.3 Survival of Blue Ocean Strategy in Zimbabwe 119
Figure 4.4 Extent of Difference between Blue Oceans and Red Oceans 120
Figure 4.5 Assertion 1 124
Figure 4.10 Analysis of Respondents‘ Description of Blue Ocean Strategy 129

LIST OF TABLES
Table 2.1 The Four Pillars Of Blue Ocean Leadership 89
Table 4.1 Interview Success Rate Analysis 110
Table 4.2 Sustainability of Blue Ocean Strategy 111
Table 4.3 Assessment of Viability of Blue Ocean Strategy 115
Table 4.4 Survival of Blue Ocean Strategy 118
Table 4.5 Difference between Blue and red ocean companies 120
Table 4.6 Comparison between Blue Oceans and Red Oceans 121
Table 4.7 Myths around Blue Ocean Strategy 123

Project Title Form
Proposed title for the Project
An investigation into the pressures that foster for the adoption of Blue Ocean Strategy
Signature of Student………………………………..
Approved Title of the Project
An investigation into the sustainability of Blue Ocean Strategy as a business level strategy
Signature of Student………………………………..
Signature of Supervisor………………………………
Date of Approval………………………………………

Declaration of Originality
I understand that the National University of Science and Technology and the Graduate School of
Business enforce a code of conduct against plagiarism and copyright infringement. Further to
that, I understand that there are several legal and academic penalties for the breach of that code.
In keeping with the said code of conduct against plagiarism and copyright infringement, I make
the following declarations:
i. That l have read the University‘s code of conduct against plagiarism contained in the
University‘s yearbook
ii. That I have not committed the offence of plagiarism and copyright infringement in my work
iii. That l have not collected or otherwise co-operated with anyone in doing my work here
presented.
iv. That I have not colluded or otherwise co-operated with anyone to help them present my work
as their own.
v. That the work I am presenting is original and that it is free from fabrication, falsification,
collaboration and collusion.
NAME MOYO TENDAI
SIGNATURE …………………………………………
DATE 24TH
OF APRIL 2015

Copyright Declaration
I hereby cede to the National University of Science and Technology library all the intellectual
property rights attaching to this dissertation/work. As the owner of the copyright over this work, the
University may store, publish or otherwise distribute the entire volume of this work or parts thereof
at its discretion will dictate.
I further certify that where applicable all copyright permission and or other authorization to use
privileged information has been obtained and attached hereto. Therefore University should not suffer
any prejudice owing to the contents of this work.
Name ………………MOYO TENDAI…………………………………… ……..
Signature……………………………………………………………………………
Date ………………………………………………………………………………

Project Release Form
I certify that the following student ………MOYO TENDAI………………… Student
Number……………P0114310F………was under my supervision. I further certify that he has
attended all the scheduled meetings with me and that he has fulfilled all the requirements that l set
before him as the Supervisor.
It is my professional judgment that the dissertation is of sufficiently high standard as to be submitted
with my name attached to it as the Supervisor.
I hereby release the student without reservation to submit his dissertation for marking.
Name of Supervisor………MR. RANGANAI J…………………………
Signature …………………………………………………………
Date………………………………………………………………

DEDICATION
This epistle is a direct and emotional product to my late mother for giving me a life to her own
detriment, for seeing a future when I could not see it, and for molding an apt character and a
culture of perseverance in me, a quality that made me stand when standing was not easy. Mum
this has since been your ultimate and utmost wish and dream that I rise above hate; and
actualize the trajectory that you envisioned for my life………….
Your legacy shall outlive the infinite!
May your gentle soul rest in eternal peace…………..

ACKNOWLEDGEMENTS
I greatly owe infinite gratitude and complements to the following distinguished people for
their unwavering comradeship and their unshakable hand of support:
 Mr. and Mrs. Moyo – the fulcrums and pillars of the possibility for all my endeavors, you
are the greatest heroes that have ever lived in my world! You cheered the marathon from
day one and even when the almighty retired you from existence, you left behind, your
hope and faith in me, thank you mum and dad.
 Gilbert and Never Moyo, had it not been your financial intervention during the last mile
of the journey, the whole apocalypse could have been shuttered en route. You gave me
the reason to believe in family
 The whole tale could not have been told had it not been your distinct and determined
effort and love Patie! You have been the fulfiller of my destiny sister, morally,
financially, emotionally and even physically, you invariantly and consistently stood by
me as a beacon of hope
 Mr. Ranganai J, my Strategic Management Lecturer as well as the project supervisor,
you would be shocked if you knew how much you have managed to inspire my success at
personal level and how you have served as a benchmark for my professional life
trajectory. Hats off to you!
 My family in its wholesomeness and in its extended sense, for running by the sidetracks
throughout the journey and standing by the sidewalk encouraging me to soldier on, Portia
I will not forget! I thank you; God bless you all!
 Ambuya Irene thank you for providing a roof over my head! It could never had been
possible without your presence
 The government of Zimbabwe for the mainstream financial assistance to all the
unfortunate and underprivileged cases congruent and equivalent to mine. We appreciate
the superordinate consideration and the sense of humor
 Over and above all, glory be to the Almighty, for this particular tale would not have been
told, had it not been out of his grace and infinite affinity. When the human world
considered me a parental accident, Jehovah you knew there was a place for me in this
world, and made all sufficient provisions for my existence, thank you father especially
for this day of submission of this product of your ultimate grace!

ABSTRACT
This study focuses on empirically testing the sustainability of Blue Ocean Strategy (BOS) as a
business level strategy with particular focus on the Zimbabwean business circus. The wealth of
literature on strategy generally and Blue Ocean strategy particularly, formed and remained the
skeletal body of reference upon which this study is underpinned. It guided both as a pointer stick
and a yard stick to direct and measure the building blocks of the framework that needed invariant
attention and circumspect vigilance throughout the study. The study‘s blue print is deep-rooted
on a two-fold research design merging exploratory and descripto-explanatory designs. The study
was executed in the form of a survey, in terms of which questionnaires were paralleled by semi-
structured interview, forming the finite set of primary data collection apparatus. Thirteen (13)
platinum member companies of the Confederation of Zimbabwean Industries (CIZ) served as the
sample representing the entire business constituency in the country. For the effective
actualization of research objectives, secondary data was also incorporated into the deduction of
an objectively developed hypothesis. It is reflected in the findings that Blue Ocean Strategy is a
robust, effective and sustainable strategic logic in Zimbabwe. The findings vehemently reinforce
the observable disproportionate marginal benefits inherent in the contemporary strategic
framework, potentially remedial to productive and distributive inefficiency challenging the major
industrial sectors in Zimbabwe. Simultaneous achievement of low cost and unique value (Value
Innovation); high performance corporate leadership (Tipping Point Leadership) and high
performance management process (Fair Process), among other inbuilt strengths of the framework
prove to be critical drivers behind the aforesaid disproportionate marginal benefits. Divergent
and innovative business initiatives (such as CBZ Holdings‘ financial inclusion Public Policy;
unconventional tobacco curing alternatives – BAT) were empirically identified as potential blue
ocean endeavors in the country. This study is focused on one of the newest research area in
strategy, and as such, builds on to the superficial body of knowledge on business-level strategy,
precisely in the country with regard to the yet attention-starved new strategic philosophy, Blue
Ocean Strategy. In that direction, the study recommends other strategists to fine-tune and refine
the strategic framework from all angles in an effort to improve its applicability and sustainability
beyond Kim and Mauborgne (2005)‘s eyeshot horizon as a concise approach to revolutionizing
the business culture in Zimbabwe.

Key words: Blue Ocean, Value Innovation, Fair Process, Tipping Point Leadership

DEFINITION OF KEY TERMS AND ACRONYMS
The epitome of the ‗new strategy dawn‘ (Blue Ocean Strategy), inevitably carries a pool of new
terms at the heart of the framework. It is out of this reason that the researcher attaches
importance to highlighting the definitions and meanings of terms and acronyms that will be
consistently used is order to effectively communicate as follows:
Blue Ocean(s): uncontested market space free of competition, with untapped demand targeted
with new and innovative offerings, which confers the potential for disproportionately high
growth and profits. (Leavy 2005; 2009, Kim and Mauborgne 2005)
BOS framework: Blue Ocean Strategy Framework
Business-level strategy: an integrated and coordinated set of commitments and actions the firm
uses to gain a competitive advantage by exploiting core competencies in specific product
markets (Gallagher; 2004)
Fig: Figure
Red Oceans: markets characterized by intense competition that are analogous to blood stained
shark infested waters (Pita 2009)
Strategy: a fundamental framework through which an organization can assert its vital continuity,
while at the same time purposefully managing its adaptation to the changing environment to gain
competitive advantage (de Wit and Meyer; 1998).
Value Innovation: The Cornerstone of Blue Ocean Strategy whereby instead of focusing on
beating competition, the company focuses on making competition irrelevant by creating a leap in
value for buyers and the company, thereby opening up uncontested market space. (Kim and
Mauborgne 2005)
Sustainability- a measure of the ability of a business to survive in the long term and to have
profits on a going-concern perspective (biztaxlaw.about.com)

CHAPTER 1 GENERAL INTRODUCTION
1.0 INTRODUCTION
The study seeks to assess the sustainability of the Blue Ocean Strategy framework as a business-
level strategy with particular focus on Zimbabwe. This chapter lays the bedrock upon which the
whole study is anchored, by highlighting the background to the study, covering the statement of
the problem, the research objectives and questions, highlighting the assumptions, delimitations,
limitations, definition of key terms and acronyms, the significance of the study, as well as the
project structure and the conclusion.
1.1 BACKGROUND TO THE STUDY
Traced from the ancient military nature of approach to battles for conquest and dominion,
strategy traditionally paralleled increasing military decision-making complexity. To that end,
business-level strategy has ever since been conceptualized along vestiges of competitive
fundamentalism, either based on cost or on quality, where the two were believed (in Porter
(1985)‘s theory) to be mutually exclusive. However, increasing research has raised empirical
evidence that quality and low cost can be achieved simultaneously, with theorists inclusive of
Deming (1986); Juran (1964); Ishikawa (1985) and Crosby (1979) among others, emerging as the
first vanguards to develop a lead in the exodus of simultaneous pursuance of quality and low
cost.
Hats-off to the alluded ‗quality at low cost‘ proponents! They laid a solid foundation upon which
modern, so-called hybrid strategies where developed, with examples inclusive of Total Quality
and Customer Value Strategy (Crosby: 1979) and Combination Strategy (Lynch: 2009) among
others. Over and above the aforesaid hybrid strategies, a superb, more robust and more elaborate
game-changing strategic framework that has since proved to be a successful break away from the
conventional strategic thinking, by drawing a lead on a new strategic paradigm and a new global
business culture that will epitomize the future of strategy, was propounded by Kim and
Mauborgne (2005) in the name of Blue Ocean Strategy.
Globally, demand for many products is falling synchronous with the falling populations in
developed markets. Industrial productivity has been enhanced by state-of-the-art technology in
almost all industries, fostering supply to exceed demand right across virtually all market

segments. Consequently, profit margins are shrinking, price wars becoming the pervasive culture
in the business arena, and commoditization of products being the resultant effect. In conventional
market environments, market space has become more fierce and crowded as competitors
offensively battle head-on, in cutthroat competition for market share and to outperform each
other (Leavy 2005). To avoid competing aggressively for the share of existing markets,
Mauborgne and Kim (2005) argue that there is need to challenge an industry‘s conventional
wisdom about which buyer group to target leading to the discovery and creation of new
uncontested market space which they called a Blue ocean, potentially highly profitable,
hospitable and accommodative for unrestricted growth, raising the need to empirically
investigate and ascertain the sustainability of the Blue Ocean Strategy framework, as a business-
level strategy, pursuant to mitigating the alluded unique challenges embedded in the new
business era.
In their Noble prize winning book, (Blue Ocean Strategy: How to Create Uncontested Market
Space and Make Competition Irrelevant) and its analytical research articles, Kim and Mauborgne
(2005) depicted existing and saturated markets whose share is battled over, by competing firms,
as analogous of bloody, shark-infested waters, which they called a Red Ocean with growth
restricted to the set boundaries of the market and profits shared averagely by firms that compete
successfully to outperform others. To overcome this challenge, they asserted that there is need to
shift the strategic compass towards incipient, uncontested market space, and unlock value from
untapped demand through value innovation (unique value propositions that create a great leap
in value for customers) as opposed to competing head on with rivals for existing space through
value imitation. These two pioneers and advocates of the radical departure from conventional
ideas on strategy (Kim and Mauborgne; 2005), highlighted that firms can earn commercial
success and make competition irrelevant by creating ―blue oceans‖ of uncontested market space,
with the potential of reaping disproportionately higher profitability and unparalleled growth. It is
the traditional strategic thinking that makes sustainability of this new strategic dimension
questionable, in the light of the trade-off between value and cost that is believed to be inherent in
the strategic choice by ancient strategy theorists, hence, the development of commitment to
empirically investigate the sustainability of the framework by the researcher, with particular
focus on Zimbabwe.

1..2 STATEMENT OF THE PROBLEM
The outstretched benevolence of the Blue Ocean Strategy framework proponents is well
appreciated in the corporate world but, remaining a mystery, is its sustainability in practice.
There is still a vestige of doubt as to whether the strategy lives long enough to define a winning
strategy and hence a new competitive dimension divergent from the concept of competitive
advantage.
Blue chip companies such as Coca – Cola and HP among others, are using the Blue Ocean
Strategy (BOS) Framework as a strategic compass to explore new business initiatives (Wubben
2012), but skepticism has emerged about the Blue Ocean Strategy (BOS) framework as a
business-level strategy. Criticism is mainly centered on the fact that the BOS framework cites
empirical examples of western companies and western environments where economies are stable
sufficiently to sustain combination strategies, making critics interrogate its sustainability outside
the western business domain (Mi. 2008)
Blue Ocean Strategy epitomizes a radical departure from conventional strategy thinking, in terms
of which the cornerstone of blue ocean strategy framework (Value Innovation) hinges on
simultaneous pursuance of differentiation and low cost. As such, critics are mainstreaming their
arguments over the ‗strategic miracle‘ of blue ocean framework that enables firms to abrogate
the value-cost trade off through synchronous achievement of differentiation and low cost. It is
conventionally believed that a company can either create greater value at a greater cost or
reasonable value at a lower cost, whereby strategy is conceptualized as making a trade-off
between value innovation and cost leadership; unless such a combination strategy can be pursued
for a short-lived time span. Otherwise, in the long run, the two cannot be actualized
simultaneously. In light of all these angles of criticism to the BOS framework, the researcher has
developed invariant commitment to assess the sustainability of BOS framework as a business-
level strategy with particular focus on Zimbabwe.

1.3 OBJECTIVES OF THE STUDY
In today`s highly competitive business environment, it has become strategically imperative for
firms to have a strategy in place to ensure a competitively superior fit between an organization
and its environment (Lynch 2009), rather than passively drifting forward without a strategy as a
competitive compass. As such, Blue Ocean Strategy is an epitome of an unconventional
strategy paradigm, pivoted on creating and capturing new demand in an uncontested market
space, juxtaposed to a strategic maneuver premised on head-on rivalry with competitors, in an
existing market space, making value cost trade-offs, aligning a firm`s activities with a strategic
choice of either differentiation or relatively lower costs (Red ocean approach). Nonetheless,
Blue Ocean Strategy has yet been exposed to its share of criticism, mainly on the grounds of
sustainability. In this regard, this study seeks to assess the sustainability of the Blue Ocean
Strategy framework as a business-level strategy through achieving the following objectives:
To assess the sustainability of the Blue Ocean Strategy framework in Zimbabwe as a
business-level strategy
To assess the marginal benefits of Blue ocean strategy relative to the cost of adoption and
implementation in the Zimbabwean economic context.
To establish whether Blue Ocean is a winning strategy in practice
To compare red oceans (conventional and existing, market space) to blue oceans
(incipient and uncontested market space)
To establish the long-term survival and going concern mechanisms for blue ocean
strategy

1.3.1 RESEARCH QUESTIONS
This study `s guiding roadmap, pursuant to the realization of research objectives, is the
aggregate of the following research questions;
Is Blue Ocean Strategy a long-sighted and sustainable business-level strategy or
just a temporary competitive tactic in Zimbabwe?
To what extent can blue ocean framework be a winning strategy?
If sustainable, at what cost-return ratio can Blue ocean strategy be implemented in
a Zimbabwean Economy?
What are the noticeable differences between blue ocean markets and red ocean
markets?
How does blue ocean strategy survive in the long run?
1.3.2 STATEMENT OF HYPOTHESES
The set of objectives underpinning this study are an endeavor to deduce either one of the
following hypotheses
H0: Blue ocean strategy framework is not a sustainable business-level strategy in
Zimbabwe
H1: Blue Ocean Strategy framework is a sustainable business-level strategy in
Zimbabwe

1.4 SIGNIFICANCE OF THE STUDY
Research studies are conducted for a purpose (Sekaran 2000) and this study is not an exception.
Its significance is thus the aggregate of the following;
1.4.1 THEORETICAL SIGNIFICANCE
Blue Ocean Strategy framework is the most promising future of strategy, yet the most attention-
starved in terms of literature. Beyond the borders of (Kim and Mauborgne, 2005a, 2005b) `s own
articles and book reviews, there is only a trickle of written scriptures published specifically
focusing on the BOS framework. It has been out of this superficial publication on the framework
that interest descended heavily upon the researcher‘s intention to co-build (with other strategists)
on to the skeletal body of research on this new strategic paradigm.
When Kim and Mauborgne (2005) published their book, Blue Ocean Strategy: How to Create
Uncontested Market Space and Make Competition Irrelevant) it appeared as if they were talking
of a completely unprecedented phenomenon, whereas the ideology underlying in the framework
has since existed a long way back, probably in different terminology by ancient scholars of
strategy (―Best-Cost Strategy: Porter; 1985, Total Quality Strategy: Crosby; 1979, etc.). Thus, it
is from this angle that, the researcher also endeavors to highlight the synergies and contrasts
between the newly propounded, 21st
century leading strategic paradigm (Blue Ocean Strategy)
and other strategic dimensions that existed prior to its emergence. This will also develop a body
of literature that will augment comprehension of the new strategic dimension and its roots.
1.4.2 SIGNIFICANCE TO THE RESEARCHER
It is the institution‘s policy that a research project be submitted as a pre-requisite for graduation
in the area of study. Thus, this study is undertaken in partial fulfillment of the requirements of a
Bachelor of Commerce Honors Degree in Management.
As an aspiring entrepreneur and a passionate follower of the Blue Ocean philosophy, the
researcher will be justified by empirical evidence to employ blue ocean strategies to pace-set the
economic platform and permeate a new generation business culture in Zimbabwe.

1.4.3 SIGNIFICANCE TO ZIMBABWEAN COMPANIES
An investigation into the sustainability of the Blue ocean strategy framework will yield a
stepping stone into redefining the business approach in Zimbabwe, by permeating a paradigm
shift from an era of basic service offered to confined demand (Red Ocean approach), to value
innovation and premium service provision to the unthought-of demand and to all possible
corners of the markets in the business world (Blue Ocean approach) to spur a broad scope of
economic activity in Zimbabwe, and hence, the universe at large.
Also an empirical investigation into the sustainability of the contemporary strategic framework
and the practicability of abrogating the value-cost trade off; inherent weaknesses and strengths of
the framework; the nature of targeted customers, empowers the researcher with sufficient levels
of confidence to envisage the findings of the study as being useful in substantiating a solid
ground to qualify beyond a shadow of reasonable doubt, its viability in the real business world,
such that sound, informed recommendations can be made as feedback to Zimbabwean companies
in relation to their strategic planning processes.
1.5 ASSUMPTIONS OF THE STUDY
This study was premised on and guided by, the following assumptions;
 There are companies consciously pursuing blue ocean strategies and some who are
adopting the framework unawarely.
 The strategic knowledge of overall corporate direction is mainly held at the helm of the
organization by the top management
 Economists are of paramount significance in interpreting the economic intent of the
nation, hence, can suggest strategy sustaining techniques pursuant to alleviating the
economy in its wholesomeness.
 The selected sample frame will sufficiently represent the whole target population
 The responses from the research participants would be their true and honest reflection of
the relevant issues under study

1.6 DELIMITATIONS
In order to set a grand design for a feasible research, in the light of the time and resource
parameters at the researcher’s disposal, the scope of the study is delimited to the following
boundaries;
The researcher concentrated on Zimbabwe as a case study
The research catchment area is confined to Zimbabwe‘s two largest cities (Harare and
Bulawayo), as well as two smaller, yet strategic towns (Chinhoyi and Chegutu), in order
to get a dilutedly fair economic representation of the whole economy from both larger
and smaller economic circuses.
The researcher focused on the BOS framework as a business-level strategy and a holistic
approach to strategy formulation and implementation frameworks in general was beyond
the scope of this study.

1.7 LIMITATIONS
The following is a list of the limitations that confronted the researcher in formulating and
executing the research.
At the zenith of the limitations catalogue, are exploitative financial challenges. All efforts
were raised to create and maintain invariant quality standards for the project in the face of
deprived resources and a tight time scale. Data collection and project administration
expenses (printing and binding) posed critical financial challenges. Nonetheless, the
researcher had wrestled to budget enough to ensure that the quality of the project would
not be constrained by resource hurdles.
The researcher had to balance other commitments (Assignments, course studies and
preparation of examinations) within abridged time scale to accomplish the project, in
terms of which a great deal of social time was sacrificed
to ensure timely completion of the project.
The researcher had limited expert knowledge in research. However, the knowledge that
was acquired during the study of the Research Methods course was put to the most
effective use. Assistance was sought from the experienced lecturers and secondary
information sources were consulted successfully
The concept of Blue Ocean is new in the business world and as such, the researcher had
to provide premium clarity on the study to get relevant responses to the research
questions to realize the research objectives.

1.9 PROJECT STRUCTURE
This project comprises five chapters. It will then include the appendices of tools used as
well as the references sections at the end as follows:
Chapter 1: General Introduction
The General Introduction lays the bedrock upon which this whole study is anchored by
highlighting the background to the study, elucidating the statement of the problem, the
research objectives and questions, highlighting the assumptions, delimitations,
limitations, ethical considerations as well as the significance of the Study.
Chapter 2: Literature Review
Chapter Two explores the wealth of literature on strategy in general, business-level
strategy in particular, with Blue Ocean Strategy emerging as the centerpiece of discussion
in the chapter. The cornerstone role of this chapter stands to be the deductive function
that augments the inductive empirical investigation to develop a body of knowledge that
addresses the research objectives and prove one of the developed hypotheses.
Chapter 3: Research Methodology
The philosophy underpinning the study, its distinctive paradigm, design, data collection
techniques, sources of data as well as the data presentation and analysis techniques are
elucidated and substantiated collectively to form the research methodology in Chapter 3.
Chapter 4: Data Presentation & Analysis
Over and above presentation, description, categorizing and interpreting of data, this
chapter includes qualitative and quantitative analysis of data with the motive of deducing
the resultant product of the research findings.
Chapter 5: Summary of Research Findings, Conclusions &Recommendations
This chapter thwarts and winds up the study in the form of a summary encompassing the
research findings, conclusions informed and inspired by the findings and
recommendations to the Zimbabwean business fraternity on how to consolidate and
sustain Blue Ocean Strategies to define a completely new business era and to map the
future of business culture in this particular economy.

Appendix – this is the last item of this report where references and a collection of tools
used in the study are given.
1.10 CHAPTER CONCLUSION
As part of the background, this chapter introduced the gist of Blue Ocean Strategy, highlighting
the invaluable contribution of its ancient equivalents to the successful birth of a redressed and
fresher strategic paradigm vis-à-vis the traditional approach to strategy. It is also in this chapter
that the statement of the problem, the research objectives and research questions were presented,
including the delimitations, limitations and ethical considerations, as well as the significance of
the study, and of course not to the exception of the assumptions upon which the study is
underpinned. The next chapter focuses on Literature Review as a frame of reference for this
study.
.

CHAPTER 2 LITERATURE REVIEW
2.0 INTRODUCTION
This chapter focuses on the nature, evolution and mainstream manifestation of the concept of
strategy generally, and Blue Ocean Strategy particularly as a business level strategy. The
literature reviewed splatters the bedrock upon which the theoretical frame of reference for this
study is erected, pursuant to deducing one of the hypotheses developed earlier. Beyond
reviewing the wealth of existing literature on strategy, this chapter also confers the researcher
with the platform to challenge the existing theory after empirical investigation (if results prove
the need to) as well as providing footprints for future research.
2.1STRATEGY
The nature of strategy is in such a way that, a hard and fast rule in defining it may be illusive, as
it cannot be explained as a set of straight-forward definitions and rules, fit for memorization and
application. The variety of partially conflicting views means that strategy cannot be reduced to a
number of matrices or flow diagrams that one must learn to fill in. Nonetheless, in a study
focusing on a business level strategy, it is in every angle of expectation to have a clear definition
of strategy that would be employed with consistency throughout the study. To that end, the
exodus to a clear definition of strategy begins with an aggregate of view dimensions from
different practitioners and theorists. The most holistic definition of strategy is profoundly buried
in Hax (1990)‘s five-fold definition that looks at strategy from five perspectives, as follows:
Strategy as a Coherent, Unifying, and Integrative Pattern of Decisions
From this perspective strategy forms the major force that provides a comprehensive and
integrative blueprint for an organization as a whole. As such, strategy gives rise to the
plans that assure that the basic objectives of the total enterprise are fulfilled. According to
de Wit and Meyer (1998), this assumes that strategy is conscious, explicit and proactive.

Strategy as a means of establishing an organization’s purpose in terms of its long-
term objectives
This classical view looks at strategy as a way of explicitly shaping the long-term goals
and objectives of an organization; of defining the major action programs needed to
achieve those objectives; and of deploying the necessary resources.
Strategy as a definition of a firm’s competitive domain
From this angle, strategy‘s central concern is defining the businesses a firm is in or
intends to be in. This process of definition addresses issues of growth, diversification and
investment. To that end, the key step in defining a formal strategic planning process is
effective business segmentation, which explicitly identifies a firm‘s domain. In the
context of new strategic thinking, the choice of reconstructing market boundaries as one
of Blue Ocean Strategy‘s six principles (as propounded by Kim and Mauborgne; 2005)
represents congruence with this definition of strategy, on the part of choosing an
uncontested competitive domain.
Strategy as a response to external opportunities and threats and to internal
strengths and weaknesses as a means of achieving competitive advantage.
According to this perspective, the central thrust of strategy is to achieve a long-term
sustainable advantage over a firm‘s key competitors in every business in which it
operates. This view of strategy is what underlies most of the modern analytical
approaches used to support the search for a favorable competitive position. It recognizes
that:
 The ultimate objective is for the firm to achieve a long-term competitive
advantage over its key competitors in all of its businesses.
 This competitive advantage is a result of thorough understanding of the external
and internal forces that strongly affect an organization. Externally, a firm must
recognize its relative industry attractiveness and trends, and the characteristics of
major competitors. This helps generate the discovery of the opportunities and

threats that must be reckoned with. Internally, a firm must identify its competitive
capabilities. This leads to the defining of its strengths and weakness.
 Strategy allows organizations to achieve a viable match between their external
environment and their internal capabilities. The role of strategy is not viewed
simply as a passive response to the opportunities and threats presented by the
external environment, but rather as a process of continuously and actively
adapting the organization to meet the demands of a changing environment.
Strategy as a logical system for differentiating managerial tasks at corporate,
business and functional levels.
The various hierarchical levels in the organization have quite different managerial
responsibilities in terms of their contribution to defining the strategy of the firm. The
corporate level is responsible for tasks that need fullest scope in order to be addressed
properly. Primarily, this means defining a firm‘s overall mission; validating proposals
emerging from business and functional levels; identifying and exploiting linkages
between distinct but related business units; and allocating resources with a sense of
strategic priorities.
The business level is the proper place for all the activities needed to enhance competitive
position of each individual business unit. The key assignment of the functional level is to
develop necessary competencies – in finance, administrative infrastructure,
manufacturing, distribution, marketing, sales and services – needed to sustain competitive
advantage.
Pursuant to that, recognizing the differences in these managerial roles, integrating them
harmoniously, is another key dimension of strategy.

It is in concordial agreement with Hax (1990)‘s conceptualization of strategy, that the thesis of
Mintzberg (2009)‘s five-fold definition of strategy was rendered. In the author‘s dimension
(Mintzberg), strategy is an aggregate of five perspectives, in the form of:
Strategy as a Plan – a direction, a guide or course of action into the future, a path to get
here from there
Strategy as a Pattern – the aggregate of behavior that can be consistently observed in an
organization over time.
Strategy as a Perspective – the organization’s fundamental way of doing doings and
perceiving the world
Strategy as a Position – the locating of particular products in a particular market (an
“environment”)
Strategy as a Ploy – a specific maneuver intended to outwit a competitor
At a closer glance, it is noticeable that the nature of Blue Ocean strategy is mainly reflected in
three of Mintzberg‘s perspectives. Strategy as a pattern conforms to the fundamentals of creating
blue oceans, whereby an aggregate of pioneering behavior invariantly, becomes the centerpiece
in blue ocean strategy. Though blue ocean strategy is not just about pioneering new technologies,
products and services, pioneering is the gist of blue ocean strategy, such that if it consistently
becomes the behavior of an organization, it becomes a strategy by virtue of pattern.
As a new strategic thinking dimension, blue ocean strategy posits a company as deviant and
divergent from the concept of wary competition, in pursuit of free ‗sailing‘ space, which is
reflected by Mintzberg‘s strategy as a perspective. A company that chooses to break away from
fierce road transport industry competition may define itself as a travel company rather than a bus
company and ventures into, perhaps airlines as a way of creating a blue ocean through market
broadening. This is congruent to strategy as a way how a company perceives itself – strategy as a
perspective.

Also, blue ocean strategy conforms to strategy as a position in terms of which a company choses
an environment to position itself (whether in red oceans or in uncontested market space). Thus
the concept of blue ocean strategy is not without concrete and firm support, correlation and
concordial agreement with other strategy theorists apart from Kim and Mauborgne (2005).
In light of all the angles highlighted by different theorists, a unified concept of strategy can now
be developed with sufficient levels of comprehensiveness. Thus the concept of strategy embraces
the overall purpose of an organization. From this unifying point of view, strategy becomes a
fundamental framework through which an organization can assert its vital continuity, while at the
same time purposefully managing its adaptation to the changing environment to gain competitive
advantage (de Wit and Meyer; 1998).
2.2 THE ORIGIN OF STRATEGY
The word strategy can be traced from as back as the ancient Athenian position of strategos, a
compound of ―stratos‖; which meant army and ―agein‖, to lead (Stahl and Grigsby; 1997). Thus
the emergence of the term paralleled increasing military decision-making complexity. According
to Cummings (1993), Aineias the tactician, who wrote the earliest surviving western volume on
military strategy, ―How to survive under siege”, in the mid fourth century BC, was primarily
concerned with how to deploy available manpower and other resources to the best advantage. In
this direction, if military practice is identified as a metaphor for business competition, the
strategic principle of the Strategos still provide useful guides for those in the business strategy
formulation to date.
2.3 STRATEGY ANATOMY
Strategy can be conceptualized as an aggregate of three fundamental facets: Process, Content,
and Context, where process refers to the manner in which strategies come about; content being
the product of process, stating what is and what should be, the strategy for the company in each
of its constituent units (Hax 1990). Lastly, according to the author, context refers the set of
circumstances under which both the strategy process and strategy content are determined, stating
where and in which firm or environment are the strategy process and strategy content embedded.

It is from the content, where the gist of this study emanates and for that very reason, the anatomy
of the strategy content shall be viewed at a magnified scope. To that end, the content of strategy
can be further segmented into three taxonomies namely, corporate level strategy; business level
strategy and functional level strategy as depicted in fig 2.1 below.
Fig. 2.1 Strategy Anatomy
Source: www.docstoc.com (2015)

2.3.1 CORPORATE LEVEL STRATEGY
“Consider the little mouse, how sagacious an animal it is which never entrusts its life to one hole
only” (Plautus 254-184 BC)
Stahl and Grigsby (1997; 114) defines corporate strategy as the broad and long-lasting decisions
on what businesses a particular firm should be in, pursuant to addressing underlying issues of
concentration and diversification. The term decision here implies that a choice is consciously
made among available alternatives. The ultimate effect of corporate level strategy is hence,
creation of the strategic compass that points out the way in determination of the overall direction
towards where a firm intends to maneuver.
Within the corporate strategy is embedded the concept of strategic fit and core competency
which precipitates the paradox of responsiveness and synergy, where companies have to make a
choice between concentration and diversification. As concentration refers to offering products or
services in narrow markets, diversification on the contrary, becomes the resource leveraging in
pursuit of economies of scope, where a firm is able to productively share resources among two or
more business units. In this regard, Porter (1987) posits that corporate strategy is what makes the
corporate whole add up to more than the sum of its business unit parts. A more comprehensive
visualization of the strategy content can be aided by fig. 2.2 below
Fig 2.2 Strategy Content

2.3.2 BUSINESS LEVEL STRATEGY
“Drive thy business; let it not drive thee!” (Benjamin Franklin 1706-1790)
As the corporate strategy epitomizes the grand plan and the fundamental decision on which
businesses to be in, business level strategy devises a roadmap on how to compete in the chosen
businesses. Gallagher (2004) defines business-level strategy as an integrated and coordinated set
of commitments and actions the firm uses to gain a competitive advantage by exploiting core
competencies in specific product markets.
De Wit and Meyer (1998) brings in the field of strategy, contrastive perspectives of strategy at
business-level which are broadly examined below:
2.4 THE OUTSIDE-IN PERSPECTIVE
It is at this organizational decision making level, where a divergence in strategic paradigm
emerges. According to de Wit and Meyer (1998), two perspectives of strategy evolve at business
level, in terms of which a distinct line is drawn between the Outside-in perspective which mirrors
the traditional strategy conceptualization and the Inside-out perspective which epitomizes the
ground breaking, new era strategy (the Blue Ocean strategy framework). The outside-in
perspective is an absolute epitome of what Kim and Mauborgne (2005) referred to as a Red
Ocean strategy. Strategists adopting this perspective believe that firms should not be self-
centered, but should continuously take their environment as a starting point when determining
their strategy. Successful companies, it is argued, are externally-oriented and market-driven
(Day, 1990; Webster, 1994). Such companies take their cues from customers and competitors,
and use these signals to determine their own game plan (Jarwoski and Kohli, 1993). This
perspective is more akin to Porter (1985)‘s Generic strategies and probably the reactor and
analyzer type of Miles and Snows (1978)‘s adaptive strategies, which shall be examined in detail
herein.

Competitive strategy (business-level strategy) can be conceptualized in two antagonistic
dimensions; anticipatory tactics which mirror blue ocean strategy, and engagement tactics which
reflects red ocean strategy as divulged in fig 2.2 below
Fig 2.3 Business-Level Strategy
Fig 2.4 above typifies beyond a shadow of doubt, the red ocean approach to strategy, in terms of
which the outside-in perspective is envisaged at its best. With the first quadrant (yellow;
preemption) reflecting Miles and Snows (1978)‘s prospector type of strategy characterized by
pioneering of new products and new technologies, which draw it towards the blue ocean
philosophy, however the difference lies on focusing on competitors.
The second quadrant, (red; attack) epitomizes Miles and Snows (1978)‘s analyzer strategy,
characterized by imitating market leaders and confront them using cost advantage (leveraging on
no/low R&D costs). The third quadrant reflects Miles and Snows (1978)‘s reactor strategy,
characterized by drifting with the environment as it goes and wait for events to change then
respond contingently – a passive and unpredictable kind of strategy, with a high degree of
inconsistency.
Lastly, the fourth quadrant represents what Miles and Snow (1978) calls a defender strategy,
which has an element of blue ocean philosophy in the sense that it seeks to fortify gained market
step by creating structural barriers in the industry, usually sealing the market with greater levels
of efficiency and low cost. However, the distinguishing factor is the focus; this strategy seeks to

consolidate an established ground in an existing market, whereas Blue Ocean Strategy seeks to
create unprecedented value beyond boarders of competition, and consequently make it
(competition) irrelevant.
Also under this perspective (outside-in) lie Porter (1985)‘s generic strategies, as the most
prominent traditional strategic framework that mirrors the red ocean approach to strategy,
underpinned by the fundamental conviction that quality and low cost cannot be achieved
simultaneously
Fig 2.4 PORTER’S GENERIC STRATEGIES

According to Porter (1987), two competitive dimensions are the keys to business-level strategy,
pursuant to responding to the challenges of his prior identified five forces. The first dimension is
a firm‘s source of competitive advantage, which involves deciding whether a firm tries to gain an
edge on rivals by keeping costs down or by offering something unique in the market. The second
dimension is firms‘ scope of operations, which involves deciding whether a firm tries to target
customers in general or whether it seeks to attract just a segment of customers. Three generic
business-level strategies emerge from these decisions:
Cost leadership;
Differentiation;
Focus:
 Focused Cost leadership; and
 Focused differentiation.
In Porter (1985)‘s landmark theory on strategy, encapsulated is the conviction that rarely can a
firm be able to offer both low prices and unique features that customers find desirable, a notion
loudly elucidated in the author‘s controversial statement ― being ‗all things to all people‘ is a
recipe for strategic mediocrity and below average performance‖ (p. 12). Porter was of the belief
that, if a benefit of doubt can be given to a fraction that can abrogate the value-cost trade off;
those firms will be following what the author dubbed ―a best-cost strategy‖ (which mirrors what
in a concise approach, Kim and Mauborgne (2005) referred to as the Blue Ocean strategy). The
author further raised an intriguing argument in the field of strategy when he asserted that there is
a fourth defacto strategy in the business-level competitive strategy, which the author identifies as
―stuck in the middle‖. It is however, not an a priori, purposeful strategy per se but the result of
not successfully pursuing any of the three generic strategies. Reduced in simple language, it
implies that in pursuit of simultaneous low cost and appealing unique features, firms may lose
track and end up ―stuck in the middle‖ of low-cost and differentiation.

Fig 2.5 OVERALL COST LEADERSHIP
In Porter (1985)‘s postulation, cost leadership strategy hinges on a firm‘s endeavor to achieve the
lowest possible cost of operation in the industry, through managing relationships throughout he
value chain and lower costs throughout the chain. It is noteworthy that, a firm can be the lowest-
cost producer yet not offer the lowest priced products/services. According to Stahl and Grigsby
(1997), this typical firm would enjoy profitability above industry average.
However, cost leaders often do compete on price and are very effective at such a form of
competition with their low-cost structures.

Successful implementation of this particular generic strategy calls for an organization-wide
commitment to achieving a low-cost structure and a broad scope to serve many industry
segments to capitalize on breadth of operations so as to achieve cost advantage. Low-cost
producers typically sell a standard, or no-frills product and places considerable emphasis on
efficiency and on reaping scale or absolute cost advantages from all sources, (de Wit and Meyer;
1998). This can be actualized through a multiplicity of business re-engineering processes, to
ensure efficient execution of day to day tasks (easy of doing business); aggressive construction
of efficient scale facilities; vigorous pursuit of cost reduction from experience; tight cost and
overhead control; outsourcing non-core activities; preferential access to raw materials; acquiring
buying economies of scale; and attending all possible critical cost drivers. In this regard, the
heart and focal point of low-cost leadership lies in the manufacturing function, being the
‗maternity ward‘ within which pitfalls of this generic strategy are ‗born‘. The imperativeness of
lean operations for low-cost leadership, usually results in exclusive focus on manufacturing to
the detriment of other mainstream business concepts, like marketing, research and development,
total quality management to mention but a few.
In extended scrutiny of Porter (1985)‘s generic strategies, Lynch (2009), raised a number of
issues that seem to be handicapping the robustness and the effectiveness with which the
strategies can be utilized as a strategic compass to map the road to corporate success. In his
thesis, the author highlighted the downside of the overall cost leadership as follows:
As companies gain experience in the industry, they will ultimate descend down their
experience curve and reduce their costs as well. (This raises a question of ―how far can
cost leadership be sustainable in the long run?‖).
Excessive cost-reduction ultimately results in a firm having no option, but to temper with
the product features and attributes, potentially affecting functionality and standard
quality.

Low cost leadership assumes that technology is relatively predictable, if changing.
Radical change can so alter the cost positions of actual and potential competitors that the
concept may be of only limited relevance in fast-changing, high technology markets.
The major strategic problem with cost leadership as a generic form of business level strategy is
that a firm must be a cost-leader and not one of the several firms vying for that position, yet there
can only be one leader among a multiplicity of firms. This explains the predicaments that Bata at
local level; and Northwest Airlines at global level, found themselves within. Bata endeavored to
adopt a low cost leadership strategy where it aimed at using its economies of scale in gaining
market competitive advantage, through delivering its products at the lowest possible cost of
production (marketingteacher.com 2015). This whole strategic plan staggered on execution as it
failed to stand the low-cost leadership battle, in the face of Asian trader companies, which
according to Porter (1985) is getting ―stuck in the middle‖. Similarly, Northwest Airlines is
another low-cost firm that fell in the same trap (de Wit and Meyer; 1998: 352). Nevertheless,
companies like Wal-Mart have proved to have succeeded in pursuing overall cost leadership as
depicted in fig.
It is in the light of these highlighted repercussions associated with the extremity and myopia of
overall cost leadership as a generic business level strategy, that the new strategy paradigm was
developed by the Blue Ocean strategy vanguards in a bid to address and mitigate the blind spots
of traditional strategic thinking.
It was Porter (1985)‘s argument that, a cost leader must achieve parity or proximity in the bases
of differentiation relative to competitors to earn above- industry average profits, even though it
relies on cost leadership for its competitive advantage. It was this notion that served as a stepping
stone for a creative refinement by Kim and Mauborgne (2005) that gave birth to Blue Ocean
Strategy framework, where they assert that if a firm can achieve low-cost and a leap in value for
customers simultaneously, it will earn disproportionately high profitability and unparalleled
growth.

Fig. 2.6 OVERALL DIFFERENTIATION
Source: www.docstoc.com (2015
According to Porter (1985), differentiation is a business level generic strategy employed by a
firm to seek uniqueness in its industry along some dimensions valued by customers. The author
further posits that the choice to uniquely offer one or more none-price attributes that many
buyers in an industry perceive to be important is rewarded by a premium price.

Differentiation can be on the basis of the product itself; the delivery system by which the product
is offered; or the marketing approach, among a broad range of other factors. Pursuant to that,
Porter (1985) argues that a firm that can achieve and sustain differentiation will be an above
industry performer in its domain, if its premium price exceeds the extra costs incurred in the
process of raising the proportionate value for buyers. Again, the author asserts that just like a
cost leader needs to aim differentiation parity or proximity, a differentiator also should aim cost
parity or proximity relative to competitors by reducing costs in all areas that do not affect
differentiation. To that end, it is noteworthy that the pressure for a differentiator to achieve cost
parity or proximity relative to competitors, coupled by the pressure for a cost leader to achieve
differentiation parity or proximity, to earn above-average industry profits in either case, is what
seemed to be the jig-saw puzzle that Kim and Mauborgne (2005), managed to fit in the vanguard
of the standing out new strategy paradigm (Blue Ocean Strategy framework).
The logic of differentiation strategy requires that a firm choose attributes in which to
differentiate itself that are different from its rivals. In juxtaposition to cost leadership, however,
there can be more than one successful differentiation strategy in an industry if there are a number
of attributes that are widely valued by customers. In light of that, it can be analyzed that the
value thrust is more viable than the cost thrust. (Value for buyers is the point of departure in Blue
Ocean Strategy framework)
Differentiation as a generic business level strategy is typical of the prospector strategy as
propounded by Miles and Snow (1978) in their adaptive business level strategy. It is the products
and/or services offerings of this innovative nature that the blue ocean strategy‘s analytical tool
(Pioneer-Settler-Migrator Map) classifies as pioneer products/services. However, Lynch (2009)
also points out some issues that seem to water down differentiation as a generic strategy. The
author asserts that differentiated products are assumed to be higher priced. This is probably too
simplistic, in the sense that the form of differentiation may not lend itself to higher prices.
The notion behind Lynch (2009)‘s argument is premised on the fact that Porter (1985) just
throws a dubious assumption that once differentiation has been decided on, it is obvious how the
product should be differentiated. This argument became the hallmark of Mintzberg (1996)‘s
foundation for his six generic strategies that were developed in an attempt to address inherent
weaknesses in Porter‘s generic strategies.

In that direction, Mintzberg et al (1996) postulates six generic strategies addressing clearly the
modes of differentiation available for firms who seek to be unique in the industry. Thus the
strategy was broken down into an aggregate of the following:
Differentiation by price – this is the typical cost leadership strategy under Porter‘s
generic strategies, whereby the producer seeks to absorb the lost margin or makes it up
through a higher volume of sales attracted by low price. This strategy may be used with a
product undifferentiated in any way (in effect a standard design, perhaps a commodity)
Differentiation by image – according to Mintzberg et al (1996), marketing is sometimes
used to feign a difference where it does not otherwise exist, that is, an image is created
for a product, including cosmetic differences to a product that do not enhance
performance in any serious way, for instance, putting a fancier package for yoghurt.
Differentiation by support – this entails a more substantial form of differentiating a
product or service offering, yet still having no effect on the product itself (something that
goes alongside the product, for example, 24-hour delivery; servicing the product).
Congruent to this strategic dimension, Levitt (1980) argues the interesting point that
―there is no such thing as a commodity‖ (p. 8). The author‘s argument is pivoted on the
belief that, no matter how difficult it may be to achieve differentiation by design, there is
always a basis to achieve another substantial form of differentiation, especially by
support.
Differentiation by quality – this form has to do with features of the product that makes
it better (not fundamentally different, just better). Its either the product performs with (1)
greater initial reliability; (2) greater long-term durability; and/or (3) superior
performance.
Differentiation by design – this entails offering something that is truly different;
something that breaks away from the ―dominant design‖. When everyone was making
cameras whose pictures would be seen next week, Edward Land made one whose
pictures would be seen the next minute (Mintzberg et al; 1996).
Undifferentiation strategy – according to the authors, to have no basis for
differentiation is a strategy.

In as much as Mintzberg et al (1996) have had moved a long way in remedying, Porter (1985)‘s
blind spots on his prominent generic strategies, a gap still existed in strategic thinking, as the
authors treated differentiation by price and differentiation by quality as mutually exclusive
strategic dimensions. However, Gilbert and Strebel (1998) disagrees with this notion, arguing
that highly successful companies such as some of the Japanese automobile manufacturers have
adopted ―outpacing strategies‖, in terms of which they first use low cost strategies to secure
markets, and then, by ―proactive‖ differentiation moves, they capture certain important market
segments. Or else, they begin with value differentiation and follow up with ―preemptive‘ price
cutting. In effect the authors argue that companies can achieve both forms of Porter‘s
competitive advantages simultaneously. This argument gives room to the standing out of the
intersection strategic paradigm (Blue Ocean Strategy) that provides a road map to the
actualization of both, low price and exceptional quality.
2.4.1.3 FOCUS STRATEGY
This generic strategy is quite different from the others because it is pivoted on the choice of a
narrow competitive scope within an industry. The focuser selects a segment or group of
segments in the industry and tailors its strategy to serving them to the exclusion of others. By
optimizing its strategy for the target segments, the focuser seeks to achieve a competitive
advantage in its target segments even though it does not possess a competitive advantage overall,
(Porter; 1985).
The focus strategy has two variants:
Focused Cost leadership – A focused cost leadership strategy requires competing based
on price to target a narrow market
Focused differentiation – A focused differentiation strategy requires offering unique
features that fulfill the demands of a narrow market.

Faced with the alluded veritable onslaught on generic strategies, many authors of modern day
strategy have advocated that Porter should gracefully concede that there might be some
weaknesses in his concept. However, Porter hit back in 1996 by drawing a distinction between
basic strategy and ―operational effectiveness‖. The former concerned the key strategic decisions
facing any organization while the latter is more concerned with such issues as Total Quality
Management, out-sourcing, reengineering among others. Nonetheless, empirical evidence far
before the emergence of Blue Ocean strategy shows that some companies do pursue
differentiation and low cost strategies at the same time. According to Lynch (2009), they use
their low costs to provide greater differentiation and then reinvest the profits to lower their costs
even further. Benetton (Italy); Toyota (Japan); BMW (Germany), have been cited as examples.
This dispels Porter‘s threats of getting ‗stuck in the middle‘, as further qualified by the strategic
framework under study (Blue Ocean Strategy). The author concluded that if Porter (1985)‘s
generic strategies framework can be treated only as part of a broader strategic analysis (not a
mainstream strategic dimension), it can serve as a useful tool for generating basic options for
strategic analysis, as it forces exploration of two important aspects of strategic management: the
role of cost reduction and the use of differentiated products in relation to customers and
competitors. Pursuant to that comment, the Blue Ocean framework uses the two fundamental
constructs (low cost and differentiation) as the building blocks in strategic consideration, to the
outstanding emergence of the new future of strategy (Blue Ocean Strategy).
2.5 THE INSIDE-OUT PERSPECTIVE
The inside-out perspective mirrors the new era, ground breaking strategy (the Blue Ocean
strategy framework), and its ancient equivalents, inclusive of the Total Quality and Customer
Value Strategy. Strategists adopting this dimension of strategy argue that strategies should not
be built around external opportunities, but around a company‘s strengths instead. They believe
that organizations should focus on the development of difficult-to-imitate competencies and/or
innovation of unprecedented value. In this regard, markets should subsequently be chosen,
adapted or created. Successful companies, it is argued, are competence-based and are market-
drivers, (Prahalad and Hamel, 1990; Heene and Thomas, 1996). Under this perspective lies the
lasting contribution of Crosby (1979)‘s Total Quality and Customer Value strategy, which
epitomizes the ancient version of Blue Ocean strategy.

2.5.1.0 TOTAL QUALITY AND CUSTOMER VALUE STRATEGY: CROSBY (1979)
The invaluable contributions of theorists like Deming (1986): Juran (1964) and Ishikawa (1985)
in the advocacy for quality at low cost cannot go unnoticed. However, it was Crosby (1979) in
his prominent book “Quality Is Free” that challenged the conventional wisdom entrenched in
the traditional economic theory that quality or any feature of a product, costs money. Crosby
(1979) argues that firms can design the product the right way at the first time to eliminate the
possibility of recurring defects in production, as well as designing manufacturing processes so
that the conversion process maintains quality consistency. The author further posits that,
continuously improving the products/services and the process will yield in even greater value for
customers.
Total Quality as a business level strategy, emphasizes on customer centricity and consistent
value improvement. Its twin image with the Blue Ocean Strategy emanates from the fact that its
primary focus in on the customer not on the competitor. The primary objective of this strategy is
to retain current customers and attract new by delivering the best of value
2.5.1.1 Best Net Value: The cornerstone of Total Quality and Customer Value Strategy.
According to Deming (1986), value can be either positive or negative, because value can be
realized, or value can be sacrificed. The author raised an interesting value concept (sacrificed
value versus realized value), in terms of which he asserts that Realized Value (R.V) is the value
that customers receives in the form of utility whereas Sacrificed Value (S.V) is the value the
customer gives up in the form of time, money and energy among other resources.
It is the difference between the alluded two dimensions of value that aggregates to the best net
value, thus if the value realized is greater than the value sacrificed, then the customer realizes a
net value. The business objective is to move the firm‘s customers to a position of higher value
realized and lower value sacrificed, so that the best net value in the industry is offered.

Fig 2.7 The value inequality model
Sacrificed Value
Net Best Value
Realized Value
Source: researcher’s own derivative
The concept illustrated above envisages the evolution of the notion of simultaneous pursuance of
quality and low-cost which came a long way through a series of fine-tuning and refining to the
birth of the now known as the blue ocean strategy. It is the Net Best Value that was referred to as
Value innovation by Kim and Mauborgne (2005), achieved through driving up value for buyers
and reducing costs (an advanced replica of increasing realized value and reducing sacrificed
value).
In light of all the business level strategies examined herein, it is of perceived value to capitalize
on the lead developed so far into the inside-out perspective to rigorously understand the nature
and content of the Blue Ocean Strategy framework at a profound depth.

2.5.2
“The process of discovering and creating blue oceans is not about predicting or preempting
industry trends. Nor is it a trial-and-error process of implementing wild new business ideas that
happen to come across manager’s minds or intuition. Rather, managers are engaged in a
structured process of reordering market realities in a fundamentally new way. Through
reconstructing existing market elements across industry and market boundaries, they will be able
to free themselves from head-to-head competition in the red ocean.”(Kim and Mauborgne: 2005)
2.5.2.1 CREATION OF BLUE OCEANS
The ground breaking strategic hall mark Blue Ocean Strategy materializes from a futuristic and
reconstructionist view of strategy where, it is not the attractiveness of the industry that
cultivates a difference, but what can be done even to a declining industry to create great leaps of
unprecedented value for customers through reconstructing the anchor pillars and building blocks
of the market environment.
According to the traditional conceptualization of industry attractiveness as entrenched in Porter‘s
five forces framework (Porter 1985), industry attractiveness is determined by the aggregate of
the following forces; bargaining power of buyers, bargaining power of suppliers, threats of new
entrants, threats of substitutes and industry competitor rivalry as depicted overleaf:

Fig 2.8 Industry Attractiveness Assessment Model
Contrary to the above notion of focusing hard on environmental scanning and market assessment
to try and come up with an industry with an aggregate of low of the above so highlighted forces,
Blue Ocean creation is centered at value innovation, where all possible sources and forms of
competition are made irrelevant; threats of substitutes and bargaining power of buyers
neutralized by unprecedented and insubstitutable value; threats of new entrants deterred by
patents and copyrights, or weakened by first mover advantages. By virtue of supplying one
unique client, suppliers‘ bargaining power is automatically attenuated. The vanguard of this new
strategic phenomenon, (Kim and Mauborgne, 2005) used the case of Cirque du Soleil, one of
Canada‘s largest cultural exports. Created in 1984 by a group of street performers, Cirque‘s
productions have been seen by almost forty million people in ninety cities around the world. In
less than twenty years Cirque du Soleil has achieved a level of revenues that took Ringling Bros.
and Barnum & Bailey—the global champion of the circus industry—more than one hundred
years to attain. Kim and Mauborgne (2005)
What makes this rapid growth all the more remarkable is that it was not achieved in an attractive
industry but rather in a declining industry in which traditional strategic analysis (five forces
industry analysis framework) pointed to limited potential for growth. Supplier bargaining power
on the part of star performers was strong; so was buyer bargaining power. Alternative forms of
entertainment (Substitutes) — ranging from various kinds of urban live entertainment to sporting
events to home entertainment. Partially as a result, the industry was suffering from steadily

decreasing audiences and, in turn, declining revenue and profits. Ringling Bros. and Barnum &
Bailey set the standard, and competing smaller circuses essentially followed with scaled-down
versions. From the perspective of competition-based strategy (Red Ocean Approach), then, the
circus industry appeared unattractive.
Another compelling aspect of Cirque du Soleil‘s success is that it did not win by taking
customers from the already shrinking circus industry, which historically catered to children.
Cirque du Soleil did not compete with Ringling Bros. and Barnum & Bailey, but created
uncontested new market space instead, that made the competition irrelevant. It appealed to a
whole new group of customers: adults and corporate clients prepared to pay price several times
as great as traditional circuses for an unprecedented entertainment experience. Significantly, one
of the first Cirque productions was titled ―We Reinvent the Circus.‖ (Kim and Mauborgne 2005;
4)
2.5.2.2 NEW MARKET SPACE
The game change strategic approach embedded in Blue Ocean Strategy framework is pivoted
on the notion that, to win in the future, companies must stop competing with each other. Kim and
Mauborgne (2005) reiterated that the only way to beat the competition is to stop trying to beat
the competition.
In this regard, the authors painted a portrait of a market universe composed of two sorts of
oceans: red oceans and blue oceans. Red oceans represent the known market space and all the
industries in existence today. Blue oceans denote the unknown market space and all the
industries not in existence today. In red oceans, industry boundaries are defined and accepted,
and the competitive rules of the game are known – companies try to outperform their rivals to
grab a greater share of existing demand. As the market space gets crowded, prospects for profits
and growth are reduced; products become commodities, and cutthroat competition turns the red
ocean bloody.
Blue oceans, in juxtaposition, are defined by untapped market space, demand creation, and the
opportunity for highly profitable growth. Although some blue oceans are created well beyond
existing industry boundaries, most are created from within red oceans by expanding existing

industry boundaries, as is the case of Cirque du Soleil alluded earlier. In blue oceans,
competition is irrelevant because the rules of the game are waiting to be set.
2.5.2.3 THE IMPACT OF CREATING BLUE OCEANS
The empirical investigation that was spearheaded by Kim and Mauborgne (2005) with a well-
meaning motive to quantify the impact of creating blue oceans on a company‘s growth in both
revenues and profits in a study of the business launches of 108 companies, divulged that 86
percent of the launches were line extensions, that is, incremental improvements within the red
ocean of existing market space. Yet they accounted for only 62 percent of total revenues and a
mere 39 percent of total profits. The remaining 14 percent of the launches were aimed at creating
blue oceans, which generated 38 percent of total revenues and 61 percent of total profits. Given
that business launches included the total investments made for creating red and blue oceans
(regardless of their subsequent revenue and profit consequences, including failures), the
performance benefits of creating blue waters are evident beyond a shadow of reasonable doubt.
Fig 1 below is an endeavor to depict the above scenario.
2.5.2.4 THE RISING IMPERATIVE OF CREATING BLUE OCEANS
There are several driving forces driving the imperativeness of creating blue oceans. Accelerated
technological advances have substantially improved industrial productivity and have allowed
suppliers to produce an unprecedented array of products and services, resulting in increased
numbers of industries and demand exceeded by supply.
The trend toward globalization compounds the situation, as trade barriers between nations and
regions are dismantled and as information on products and prices becomes instantly and globally
available, niche markets and havens for monopoly continue to disappear. While supply is on the
rise as global competition intensifies, there is no clear evidence of an increase in demand
worldwide, and statistics even point to declining populations in many developed markets. The
result has been accelerated commoditization of products and services, increasing price wars, and
shrinking profit margins.
All this suggests that the business environment in which most strategy and management
approaches of the twentieth century evolved is increasingly disappearing. As red oceans become

increasingly bloody, management will need to be more concerned with blue oceans than the
current cohort of managers is accustomed to, (Kim and Mauborgne, 2005)
2.5.2.5 THE HEART OF BLUE OCEAN STRATEGY: VALUE INNOVATION
In Kim and Mauborgne (2005)‘s conviction, the approach to strategy distinguishes successful
companies from the rest. Companies caught in red oceans follow a conventional approach, racing
to beat competition through building a defensible position within the industry. In juxtaposition,
pioneers of blue oceans do not use competition as their benchmark. Instead, they follow a
strategic logic called Value Innovation.
The authors highlight value innovation as the new way of thinking about, and executing,
strategy that results in the creation of a blue ocean and break away from competition. This
concept defies one of the most commonly accepted dogmas of competition-based strategy – the
conventional strategy theory inspired by Porter (1985), that companies can either create greater
value at a greater cost or create reasonable value at lower cost (value-cost tradeoff), in terms of
which strategy is conceptualized as making a choice between differentiation and low cost. On the
contrary, pioneers of blue oceans pursue differentiation and low cost simultaneously.
Instead of focusing on beating completion, the focus of blue ocean strategy descends heavily on
making competition irrelevant by creating a leap in value for the buyers and the company,
thereby opening up a new and uncontested market space. Thus Value Innovation is the
cornerstone of Blue Ocean Strategy and according to Kim and Mauborgne (2005), it places
equal emphasis on value and innovation, whereas, value without innovation tends to focus on
value creation on an incremental scale – something that improves value but is not sufficient to
make a firm stand out in the marketplace. On the converse, innovation without value tends to be
technology-driven, market pioneering, or futuristic, often shooting beyond what buyers are ready
to accept and pay for (p. 13). The value innovation concept is depicted diagrammatically as
below;

Fig 2.9 The Cornerstone of Blue Ocean Strategy
VALUE INNOVATION
Source: W. Chan Kim and Renee Mauborgne (2005), Blue Ocean Strategy; How to create
Uncontested Market Space and Make the completion irrelevant, Harvard Business School Press,
Boston, page 16
Value innovation is created in the region where a company‘s actions favorably affect both its
cost structure and its value proposition to buyers. Cost savings are made by eliminating and
reducing the factors an industry competes on. Buyer value is lifted by raising and creating
elements the industry has never offered. Over time, costs are reduced further as scale economies
kick in due to the high sales volumes that superior value generates.
Fig 2.10 Value Innovation

As shown in fig 2.10, the creation of blue oceans is about driving costs down while
simultaneously driving value up for buyers. This is how a leap in value for both the company and
its buyers is achieved. The fact that buyer value comes from the utility and price that the
company offers to buyers and because the value to the company is generated from price and its
cost structure, has an implication that value innovation is achieved only when the whole system
of the company‘s utility, price, and cost activities is properly aligned, and it is this whole-system
approach that makes the creation of blue oceans a sustainable strategy.
Blue ocean strategy integrates the range of a firm‘s functional and operational activities. In
contrast, innovations such as production innovations can be achieved at the subsystem level
without impacting the company‘s overall strategy. An innovation in the production process, for
example, may lower a company‘s cost structure to reinforce its existing cost leadership strategy
without changing the utility proposition of its offering. Although innovations of this sort may
help to secure and even lift a company‘s position in the existing market space, such a subsystem
approach will rarely create a blue ocean of new market space, (Pitta 2009).
In this sense, value innovation is more than innovation, but a strategy that embraces the entire
system of a company‘s activities instead, where companies are required to orient the whole
system toward achieving a leap in value for both buyers and themselves. Absent such an integral
approach, innovation will remain divided from the core of strategy.
2.5.2.6 RED OCEAN VERSUS BLUE OCEAN STRATEGY
There is a complete reversal opposition between saturated and incipient markets which are
epitomized by the metaphors red and blue oceans respectively, which can be mirrored by a series
of diagrams overleaf, in fig 2.11

Fig 2.11 Red Ocean versus Blue Ocean Strategy

Figure 2.11 outlines the key defining features of red and blue ocean strategies, where
competition-based red ocean strategy assumes that an industry‘s structural conditions are given
and that firms are forced to compete within them, an assumption based on what the academics
call the structuralist view, or environmental determinism. In contrast, value innovation is based
on the view that market boundaries and industry structure are not given and can be reconstructed
by the actions and beliefs of industry players. This according to the advocates of the ‗new era
strategy paradigm‘ (Kim and Mauborgne) is dubbed the reconstructionist view.
In the red ocean, differentiation is costly because firms compete with the same best-practice rule,
hence, the strategic choices for firms are to pursue either differentiation or low cost. Conversely,
in the reconstructionist world, the strategic aim is to create new best-practice rules by breaking
the existing valuecost trade-off and thereby creating a blue ocean.
2.6 FORMULATING AND EXECUTING BLUE OCEAN STRATEGY
The inherent anatomy of strategy has always presented a two fold phenomenon, which is
opportunity and risk. Kim and Mauborgne (2005) argues that there is nothing like a riskless
strategy, not even Blue Ocean can be an exception on the matter of risk. Nevertheless, the unique
ideology behind the imperativeness of creating blue oceans is the concept of opportunity-
maximization and risk-minimization achieved simultaneously. However, Blue Ocean Strategy is
not about intuitive ‗riverboat‘ gambling that can emanate from betting strategy on a random
drawing. Instead, it is a systimatic strategic methodology that is underpinned by its own
principles and analytical frameworks.

Final Draft-Blue Ocean Strategy Project

Final Draft-Blue Ocean Strategy Project

Empfohlen

Empfohlen

Weitere ähnliche Inhalte

Was ist angesagt?

Was ist angesagt? (20)

Andere mochten auch

Andere mochten auch (6)

Ähnlich wie Final Draft-Blue Ocean Strategy Project

Ähnlich wie Final Draft-Blue Ocean Strategy Project (20)

Final Draft-Blue Ocean Strategy Project