Team : Hetong Xu; Jin Liu; Jieqi Jin.
Blue Ocean Strategy
1. What is a blue ocean strategy? What is a red ocean strategy? Explain these from the perspective of company, competition, costs, and markets. Blue ocean strategy, as a business method, is about company creating a new market or industry where there is no competitor. Companies play not by traditional rules, never use the competition as a benchmark. They could ether create greater value for customers at a higher cost or create reasonable value at a lower cost. Thus, the name of the program – find a blue ocean, a new ocean to swim in. Red ocean strategy, as a business method be opposite to blue ocean strategy, is a head to head battle where the players of a particular segment compete with each other remaining in the same market space i.e. within the boundaries of the same industry on the principle of ‘competitive advantage’. 2. The authors allude to the fact that most companies borrow their strategic thinking from military models (see ‘Paradox of strategy’). How does this model affect perceptions related to competition and customers and what are the implications for creating value for markets (and employees!)? Corporate strategy is heavily influenced by its roots in military strategy. The very language of strategy is deeply imbued with military references—chief executive” officers” in “headquarters”, “troops” on the “front lines”. Described this way, strategy is all about red ocean competition, accept the key constraining factors of war---limited terrain and the need to beat an enemy to succeed. At the same time, red ocean strategy would lead to hyper-competitive work environment, thus, reduce the cohesion of company staff. 3. Using the “Snapshot of the blue ocean creation exhibit, list and explain the key success factors for the three industries (auto, computer, movie theaters ). Blue Ocean Strategy suggests that an organization should create new demand in an uncontested market space, or a "Blue Ocean", rather than compete head-to-head with other suppliers in an existing industry. When we looked back over 100 years of data on the blue ocean creation to see what patterns could be discerned. Some of our data are presented in the exhibit “A Snapshot of Blue Ocean Creation.” It shows an overview of key blue ocean creations in three industries that closely touch people’s lives: auto----how people get to work; computers----what people use at work; and movie theaters---- where people go after work for enjoyment. We found that: Blue oceans are not about technology innovation; Incumbents often create blue oceans-----and usually within their core business; Company and industry are the wrong units of analysis; Creating blue oceans builds brands. 4. The author claim “demand is created rather than fought over” in blue oceans. What does this mean? Cite examples from the article. Blue oceans, in contrast, denote all the industries not in existence today—the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored.The corner-stone of Blue Ocean Strategy is 'Value Innovation'. A blue ocean is created when a company achieves value innovation that creates value simultaneously for both the buyer and the company. The innovation (in product, service, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market. The authors criticize Michael Porter's idea that successful businesses are either low-cost providers or niche-players. Instead, they propose finding value that crosses conventional market segmentation and offering value and lower cost. 5....
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