Blue Ocean Strategy

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Statement of the purpose of the book: “Blue Ocean Strategy”

Blue Ocean Strategy (BOS) is the result of a decade-long study of 150 strategic moves spanning more than 30 industries over 100 years (1880-2000) by authors Kim, W. C., Mauborgne, R. BOS is the simultaneous pursuit of differentiation and low cost. The aim of BOS is not to out-perform the competition in the existing industry, but to create new market space or a blue ocean, thereby making the competition irrelevant. BOS offers a set of methodologies and tools to create new market space. While innovation has been seen as a random/experimental process where entrepreneurs and spin-offs are the primary drivers – as argued by Schumpeter and his followers – BOS offers systematic and reproducible methodologies and processes in pursuit of innovation by both new and existing firms. BOS frameworks and tools include: strategy canvas, value curve, four actions framework, six paths, buyer experience cycle, buyer utility map, and blue ocean idea index. These frameworks and tools are designed to be visual in order to not only effectively build the collective wisdom of the company but also to effectively execute through easy communication. BOS covers both strategy formulation and strategy execution. The three key conceptual building blocks of BOS are: value innovation, tipping point leadership, and fair process. Statement of the purpose of the Journal: “The five competitive forces that shape strategy”

In 1979, a young associate professor at Harvard Business School published his first article for HBR, "How Competitive Forces Shape Strategy." In the years that followed, Michael Porter's explication of the five forces that determine the long-run profitability of any industry has shaped a generation of academic research and business practice. In this article, Porter undertakes a thorough reaffirmation and extension of his classic work of strategy formulation, which includes substantial new sections showing how to put the five forces analysis into practice. The five forces govern the profit structure of an industry by determining how the economic value it creates is apportioned. That value may be drained away through the rivalry among existing competitors, of course, but it can also be bargained away through the power of suppliers or the power of customers or be constrained by the threat of new entrants or the threat of substitutes. Strategy can be viewed as building defenses against the competitive forces or as finding a position in an industry where the forces are weaker. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. Summary of the reading’s content and major conclusions

Introduction

Why do so many businesses fail even though they have highly competent people with great business plans? Porter (2008) suggests that the business need to be in the right industry. Five competitive forces are mentioned by Porter to have significant impact to the business world. The forces are the most important part of strategy formulation to establish a profitable business.

In today highly competitive business environemtn, Porter believes the top strategic priority is coping with the substitute product. It is similar to the concept of “Blue Ocean” that mentioned from the book: “Blue Ocean Strategy”. The author Kim and Mauborgne highlighted that there is no company in world can be successful forever but it is possible to have temporary success. The existing market with severe competition and market share competitors is called Red Ocean. In Red Oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Instead, the authors suggest company should create a new market, a so called Blue Ocean, where competition on and all the negative consequences become irrelevant for a company. The first step towards a Blue Ocean is to go without from benchmarking. To set a company on a strong,...
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