The Corner Stone Of Blue Ocean Strategy Marketing Essay

The Corner Stone Of Blue Ocean Strategy Marketing probeTo sustain in the market and show gamy performance formula is non competition in overcrowded industries. The mantra is to create blue maritimes of untapped market space. thither argon two distinct kinds of space, red ink and blue navals, in a business environment. Red ocean represents all the industries that exist and perform by the route of competing with the rivalries. Here the industry boundaries atomic number 18 already defined and followed, the competing rules of the game are known. Companies try to sur materialize their rivals to clutch a larger share of product or service demand. As the market space gets packed, scenario for economic kales and productivity growth are minify. Products become commoditiesorniche, and the cutthroat competition turns the ocean red as blood.Blue oceans denote a tender concept, not the ones that exist today it is the unknown market space, untainted by competition. Here, demand is crea ted rather than grabbing the breathing one. There is ample opportunity for growth, both in terms of profit and the speed at which the profit is obtained competition is immaterial because the rules of the game are not yet framed. Blue Ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored.The logic behind blue ocean outline contrasts with the traditional model that focuses on competing in an already existing market space. The management is not able to differentiate between red and blue ocean scheme because of the difficulty they face in breaking themselves from the competition.Companies have got huge capacities to develop new industries and re-design the existing ones, a fact that is exhibited in the deep changes that are necessary in the way industries are classified. Blue ocean strategy has been the pioneer in the standardisation, continuity and replacement of the segmentation of the industries.To win in the future, companies mustnt dispute with each other. The only way to overcome the competition is to stop trying to be in the competition. The business atmosphere in which most business strategy and management has been based on is changing, evolving or disappearing. Some of this change is due to technology. Other reasons might be culture, globalization, speed of new information, or the role of demographics in the workplace.There are 3 characteristics that contribute to a Good Strategy. 1) It is focused it is not diffused across all potential aspects of the market. 2) The shape of the value bow diverges from any potential competitors. 3) It has a compelling tagline.STRATEGIES INVOLVEDVALUE INNOVATIONThe corner-stone of Blue Ocean Strategy is Value Innovation. Instead of focussing on licking the competition, the spotlight should be on making it erroneous by creating a bound in the value for buyers and creating uncontested market space.A blue ocean is created when a company achieves value innovation that creat es value simultaneously for both the buyer and the company. Theinnovation(in product, service, or delivery) must raise and create value for the market, firearm simultaneously reducing or eliminating features or services that are less valued by the reliable or future market. Value can be identified in the conventionalmarket segmentationand offering valueandlower bell. Value innovation only occurs when transcriptions have aligned innovation with utility, cost and costs. The market must be ready to accept the product, meaning that timing is a major check. The focus is on both differentiation and low cost to provide value to both customers and the organization.Value innovation can be created in a way that the companys actions are favorable for both the company, through trim cost structure and to its customers through value proposition. Cost savings are made by disseminating and bringing down the factors an industry competes on. In case of buyers value, it is change magnitude by r ising and creating elements the existing industries has not offered in the past. Additive costs are reduced further, as scale of economies kick in due to the subjoin in record books of sale.THE STRATEGY CANVASThe strategy canvas acts as an indicative and an action framework for structuring a blue ocean strategy. Strategy Canvas seizes the current state in the market by detailing the factors players compete on in product, service and delivery. This enables the company to gain insight into the areas where the competitors are currently investing, the factors on which the industry is presently contending on its deliverables, and the end products the customers receive from the existing offerings from the competitors market.The four actions framework offers a technique that smashes the trade-off between differentiating the products and reduction in cost, thus creating a new value curve. It attends to the four key queries of the issues that an industry takes for granted and issues that need to be eliminated factors that need to be reduced below industry standards factors that needs to be raised above industry standards and what to offer that the industry has not offered before.The eliminate-reduce-raise-create grid encourages the companies to act on all four areas to form a new value curve. By motivating the companies to fill the grid with eliminating, reducing, raising, and creating actions the grid provides four immediate benefits it urges them to concurrently adopt differentiation in the products and adopting reduction of costs identifies companies who are only creating thereby raising costs makes it easier for the management to understand and comply and that drives the companies to scrutinize every factor the industry competes on.This is against the Michael Porters Five Force Strategy which implies that an organization should dominate the market in all sectors to attain competitive advantage and gain excellence. Blue Ocean Strategy embeds the concept of slowi ng down profit attrition with an efficient cut throat strategy for an already existing market, and through the profit made out of it they can increase the financial resources functional for new innovative investments and thus their chances of finding an unexploited market with plenty of potential consumers.Figure 1 Four Actions FrameworkREDUCEWhich factors should be reduced well below industry standards?ELIMINATEWhich of the factors that the industry takes for granted should be eliminated?CREATEWhich factors should be created that the industry has never offered?A NEW VALUE slideRAISEWhich factors should be raised well above the industrys standard?SEQUENCE OF BLUE OCEAN STRATEGYThe essential concept of blue ocean strategy is to get the strategic sequence right. This sequence washes out and authenticates blue ocean ideas. This reduces the business model risk. In this model, prospective blue ocean ideas must pass through a chain of buyers utility, price, cost, and adoption. At each s tep there are only two options a yes, in which case the idea may move on to the next step, or no where the company can either park the idea or rethink it until a yes.Figure 2 Sequence of Blue Ocean StrategyBUYER UTILITYIs there exceptional buyer utility in your business idea?A commercially Viable Blue Ocean IdeaADOPTIONWhat are the adoption hurdles in actualizing your business idea? Are you addressing them up front? priceCan you attain your target to profit at your strategic price?PRICEIs your price easily accessible to the mass of buyers?LG ELECTRONICS A CASE pollLG ELECTRONICS, wanted to implement Blue Ocean Management to make competition irrelevant. Their strategy was to redefine industry boundaries by focusing much on high end products and entering new segments of emerging markets like China, India and Middle East and Africa and thus create uncontested market space.They shifted their focus from increase in volume to increase in value through high-end product innovation in a ll of its four product segmentations Mobile Communications, digital Appliance, digital Display and Digital Media. Each domain of the company planned to establish high end value added products.In the mobile phone division, LG Chocolate and the Black Label serial are LGs Blue Ocean operational strategy in action, which are expected to generate around 30 per penny of sales and 50 per cent of profits by 2010. LGs Chocolate became best selling product through intensifying research capabilities and high-end design which was in the midterm strategies for the company.The Digital Display go with was the leading producer of digital TVs in LCD and Plasma modules. In the increasingly competitive digital TV market, LG Electronics had cutting-edge products through innovative products. Digital Display division was formed in joint venture with Philips to produce LCD TV and plasma TV in 2001. The digital display division had earned $ 2.77 cardinal which constituted 28% of their global sales in t he year 2005. Their business goal being becoming the dominant leader in digital TV and plasma TV, the division had undergone breakthrough innovations and products under the blue ocean strategy.The Digital Appliance, another SBU of LG Electronics, was a leader and pioneer in infrastructure appliance products, like air conditioner, refrigerator, vacuum cleaner, washing machine, microwave oven, and other home appliances. They had positive the worlds inbuilt TV, refrigerator, ARTCOOL air conditioners, steam washing machines and many more core technologies for home appliance parts and products. Building on successful home appliance operations, the company was also expanding their business scope to have a greater emphasis on new product sectors such as commercial air conditioners, built-in kitchen appliances and home networks.The digital media segment, with their global sales of $5.7 billion generated synergy with its audio and video (home theatre, DVD recorder), digital storage (super multi DVD rewriter) and personal computer (desktop and notebook PC) divisions65. Through continued technology innovation, the company had developed the worlds first Satellite DMB notebook66 in 2005. In particular, the company was actively penetrating multimedia product markets with mobile technologies, such as PDAs and MP3 players, and with composite products, such as super-multi drives and super-multi DVD recorders. They were also focusing on its Car Infotainment business.