Post on 07-Aug-2015
Blue Ocean StrategyPresented by:Nikhil MhatreRoshan TupeJyothi DharmarajanKhusbhu NakarSweety Singh
Making the Competition Irrelevant
Contents History Explanation of BOS with self made story Introduction and Definition Types of Strategy Comparison between RED and BLUE Blue Ocean Strategy & Strategic Positioning Six Principles of Blue Ocean Strategy Strategy Canvas and Four Action Framework Case Study 1 Case Study 2
Based on ‘Blue Ocean Strategy’, a book published in 2005 and written by W. Chan Kim and Renée Mauborgne, Professors at INSEAD and Co-Directors of the INSEAD Blue Ocean Strategy
Institute
W. Chan KimRenée
Mauborgne
Explanation of Blue Ocean Strategy with self made Story
Two months later…….
BOS defined…The avoidance of costly competition through innovation with the aim to create a market where no firms currently operate, leaving the company to expand without competition.
• Blue oceans denote all industries NOT in existence today
• The Unknown market space
• Untainted by competition
• In Blue Oceans, demand is created not fought over
• In Blue Oceans, growth is profitable and rapid
Always choose RIGHT side for business
Types of Strategy In the red ocean, differentiation costs because firms compete with the same best-practice principle. Here, the strategic choices for firms are to pursue either differentiation or low cost. In the reconstructionist world, however, the strategic aim is to create new best-practice rules by breaking the existing value-cost trade-off and thereby creating blue ocean.
Blue Ocean : Company creates New Market
Red Ocean : Companies compete for Customers
Blue Ocean Strategy &
Strategic Positioning
CostReductio
n
ValueIncrease
• Increase of value implies increase of cost
• Reduction of cost implies decrease in value
Viewing the Cost / Value Relationship as Inverse…
CostReductio
n
ValueIncrease
• Both cost reduction and value increase are possible…
Viewing the Cost / Value Relationship as Direct…
Value InnovationValue 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.
Costs
Buyer Value
Value
Innovation
Eliminate
Reduce
Raise
Create
Value Innovation
Formulation
Principles
• Reconstruct market boundaries• Focus on the big picture, not the
numbers• Reach beyond existing demand• Get the strategic sequence right
Execution Principles
• Overcome key organisational hurdles• Build execution into strategy
Six Principles of BOS
• Which of the factors that the industry takes for granted should be eliminated?
• Which factors should be reduced well below the industry standard?
• Which factors should be created that the industry never offered?
• Which factors should be raised well above the industry standard?
Eliminate Reduce
CreateRaise
2. Focus on the Big Picture, Not the Numbers…
A New Value Curve
Explanation
Expectation Clarity
Engagement
6. Build Execution into Strategy…
www.derekhendrikz.com
Working with other BOS Tools…
• Shows the strategic profile of an industry by depicting very clearly the
factors that affect competition among industry players, as well as those
that might in the future.
• Shows the strategic profile of current and potential competitors,
identifying which factors they invest in strategically.
• Draws the company’s strategic profile, or value curve, showing how it
invests in the factors of competition and how it might invest in them in
the future.
• The horizontal axis lists factors of competition for the industry.
• The vertical axis indicates the degree to which industry players and the
providers of alternative services invest in the competitive factors.
The Strategy Canvas:
www.derekhendrikz.com
The Buyer Experience Cycle / Buyer Utility Map (BEC / BUM) Framework
www.derekhendrikz.com
Blue Ocean Strategy Case Example 1CLASSICAL ORCHESTRA INDUSTRY
The Classical Orchestra Industry
Intensifying competition Shrinking Audiences
1993 20031993 2003
27000
37000 1137
749
No. of Concerts
Avg. No. of Audience per concert
Revenue breakdown of a typical orchestra
Source % of total revenueLive Performance <60%Royalties from Recordings
<2%
Government Funds [31% ~ 9%]Private Philanthropy
[11% ~ 40%]
Unsustainable cost structure
Half of orchestra’s costs go to salaries and superstar guest soloists and conductors.
Minimum salaries in the Big 5 over US$100K with 8 to 9 week vacation for over one hundred members.
Conductors earning over US$2M
Higher marketing costs as orchestras complete for shrinking audience and public and private funding.
High Fixed Cost
Variable costs on the rise
Strategy Canvas Traditional Orchestra Experience
Price
Star
Con
duct
or
Star
Sol
oist
Manne
rism
and
code
of c
ondu
ct
Leng
th o
f eac
h pi
ece
of m
usic
Size
of o
rcha
stra
Prod
uct c
ost
Numbe
r of c
once
rts
Venue
capa
city
Use o
f fam
iliar
mus
ic
Factors of Competition
Off
eri
ng
level
High
Low
A difficult environment even for “The Big Five”
Boston Symphony,Chicago Symphony,Cleveland Orchestra,New York Philharmonic and Philadelphia Orchestra
Despite all subsidies. Brand name and quality of performance, all 5 orchestras, whose endowments together amount to US$800 million. Are running deficits that go into the millions.
Strategy Canvas Andre Rieu vs. Traditional Orchestra Experience
Factors of Competition
Off
eri
ng
level
Eliminate Reduce Raise Create
Andre Rieu
CASE STUDY 2 :
To the rescue of
Analysis and Strategy for survival in the consoles video game industry
Nintendo WiiProfitable Growth with New Demand Creation
“We are not competing against SONY or MICROSOFT. We are battling the indifference of people who have no interest in videogames. We want to appeal to mothers who don’t want consoles in their living rooms, and to the elderly and to young women’
Satoru Iwata (Nintendo President) Fortune Magazine 06/11/07
Inside Nintendo, we call our strategy “blue Ocean". yes those who’ve always played games are still playing, but we’ve got people who’ve never played to start loving it.
Perrin Kaplan, Forbes Interview
Nintendo Wii :Results Has been selling at the rate of one unit per second since
its launch on 19th November 2006
Zipped past SONY in market value in June 2007 and became one of Japan’s top 10 companies for the first time.
While SONY loses $240~$300 on each PlayStation 3 sold. Nintendo makes $50 on every unit.
Profits reached almost $1.5 billion. or $442.000 per employee in 2007. Compared with MICROSOFT’s $177.000 and Google’s $288.000.
Strategic approach
Strategy
Nintendo Wii U launch
New Targets
New marketingcommunications
New services
Strategy 1
Big momentum for launch of
Large marketing communication campaign:
PR
Advertising
Events
Activation/trade activities
Highlight differentiators
Offer new services
Strategic alliances with top brands
Strategy 2
Attack new target audiences:
Schools
Parents
Special services
Different channel
Different positioning
Alliance with government
New marketing communications and PR campaign
Wii for senior citizens: Population ageing – longer life
Retired people have a lot of time and money
Activities and services through the Wii
Use the abilities of the Wii for this target
Develop health and exercise capabilities
Advertising of products and alliance with pharmacy companies
Marketing communications and alliances campaigns for this target
Strategy 3
Wii woman:
Increase usability of women
Shopping
Beauty apps and advise
Alliances with brands
Large marketing, branding and
communications campaign targeted
at women, mostly focused on social networks
Strategy 4
Strategy 5
Transform Wii into an entertainment hub:
Online resources
Targeted at families
Alliance with Disney and other networks
Activities for the family
Advertising and sponsorship trade with family products.
Strategy Canvas for Nintendo Wii
Price
High
Resolut
ion
Graph
ics
Non-G
aming
Func
tiona
lity
HDTV C
ompa
tibity
Proc
essin
g Po
wer
Online
Gaming
Design
and
Aesth
etics
Availa
ble
gam
e tit
les
Mot
ion
Fam
ily Frie
ndly
0
2
4
6
8
10
Factors of Competition
Off
eri
ng level
High Eliminate Reduce Raise Create
Low
Nintendo Wii
Other Gaming Companies
After 12 months…
comparison betweenManoj tutorials vs Mayur Tutorials
Manoj was following the same pattern as others did..
So due to that he was facing lot of competition as he was new in this field
On other side, Mayur took advantage of BOS and implemented some innovative ideas & change the entire pattern of business
Mayur Tutoria
ls
Mahesh
ideal
Real
Chate ManojO
thers
Following patterns used by both
Manoj & Oth-ers
• Started classes in the prime • location
• Attractive classrooms with • comforts & good ambience
• Best & high qualified fac-ulties
• Dedicated libraries for each batch
• Extra curricular activities
• Providing additional stationery
Mayur
• Web based learning • environment
• Virtual classes
• Online lectures
• Online ebooks of all high • ended authors
• Online consultation & job • placement support
• Online examinations
• Globalised access for• classes enrolment
Innovation wins………
BLUE….Thank You!!!
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