Blue Ocean Strategy :Conclusion

Team #1Andrew McDaniel

Brad SchaeferBrandon Christian

Robert PaceRyan Schafer

Barriers to ImitationValue Innovation goes against a companies

conventional logic

BOS may conflict with other companies brand image

Natural Monopoly: No market support for 2nd Player

Patents or legal permits block imitation

Barriers to ImitationHigh volume gives cost advantage to the

innovator which discourages imitators.

Network externalities discourage imitation

Imitation often requires political, cultural and operational changes

Companies that value-innovate earn loyal customers off their brand buzz

When to Value-Innovate Again

Monitor Value curves for when to innovate again

Continue to progress in your blue ocean to stay ahead of imitators as long as possible.

When supply exceeds demand, rivalries will intensify

Common Patterns amongst three industriesThere is no permanently excellent industry.

The attractiveness of all industries rose and fell over the study period.

There are no permanently excellent companies. They all rose all fell over time.

Company’s prosperity and growth was the strategic move of the blue ocean creation.

Common Patterns amongst three industries (cont.)Blue oceans were created by both industry

and incumbents and new entrants, challenging the lore that start ups have natural advantages over established companies in creating new market space.

The creation of the blue ocean was not about technology per se. But rather, the key defining feature was innovation that was linked to buyer value.

Automobile IndustryAutombiles have been around since 1893The Duryea brothers launched the first one-

cylinder auto The average cost of an automobile was $1500

and was considered a luxury itemOnly the extremely wealthy could afford

them.

Model T1908 Launch of the Model T developed by

Henry Ford. Called the car “for the great multitude,

constructed of the best materials.” Was reliable, durable, easy

to fix and priced so themajority of Americans could afford one.

General MotorsGM introduced a car for every purse and

purpose in 1924.Created a fun, exciting, comfortable, and

fashionable car. Had many different colors unlike Model T’s

solid black.

Small, Fuel-Efficient Japanese Cars1970 they changed the trend from “ the

bigger the better” to creating a smaller more efficient car.

This spurred from the oil crisis of the 1970’s

Chrysler’s Minivan1984 Chrysler unveiled the minivanBroke the boundary between car and vanWas exactly what the average family need to

hold the entire family, dogs, and other necessities.

Drove like a car but had room of a truck/vanLead to the SUV boom of the 1990’s

Compaq PC ServersProSigniaGrew PC server industry to $3.8 billion

DellDirect sales to customers

40% less than IBM4 day deliveryCustomer customization

Movie Theatre IndustryKinetoscopeNickelodeonsPalace TheatreMegaplex

Appendix B – Value InnovationStrategies need to be related to specific

industry structureTwo basic strategic views here:

Structuralist view deals with strategy changes based on external factors to the company’s structure, buyer and seller conduct, and end performance

Reconstructionist view theorizes that economic structure can be changed by forces internal to the organization

Reconstructionist ViewIf your strategy is molded from within your

organization, you need to replicate not others ideas, but their innovative techniques.

New Growth StrategyThis internal mind-set is essential for

firms that want to enter Blue Oceans and have new, different customer demands

Optimal Strategy View?Structuralist vs. Reconstructionist viewsBlue Ocean seekers use Reconstructionist

viewtend to focus on buyer value elements in

products, not strategies based on operations, cost or technology advancement.

This view ignores that there are boundaries of the structure of an industry which creates a blue ocean of new market space

The Market Dynamics of Value InnovationIncreases the appeal of a good (D1 to D2)Increases quantity sold (Q1 to Q2)Reduces costs in the long runIncreases Buyer Value (yellow to Green)Huge profit growth (red to blue)Must set prices strategically (P1 to P2)

Graphed

D1D2

P1

P2

Markets Dynamics of Value Innovation

Traditional MonopoliesSet high pricesHave high costsConsume more resourcesSociety, consumers, and the company

Perfect competition to a Monopoly

A B

C

P1

P2

Q1Q2

QUESTIONS?