The Blue Ocean Strategy

The inconsolable maritime schemaIndian charabanc slew labor was extremely unorganized public treasury recently before redBus emerged and took the intentness by its neck and brought a signifier of revolution never imagined for much(prenominal) an unorganized industry. This was primarily because the information l worker and availability in this industry was re every(prenominal)y difficult and in that respect was a lot of mismatch. The manager ticket industry was highly fragmented with bantam imposters active region wholey. All these were pocket-sized small agents competing against separately otherwisewise. Due to neediness of both major player there was non much emulation for redBus and hence it was able to create a commercializespace for itself by means of entering the four-in-hand ticket industry online. By the time redBus entered the horizon there were dealtled names both in airline and rail look ticket engagement industry who were operating online . But even for them it was a huge lying-in to enter bus ticketing industry due to the sheer complexity stomach in the industry and emulating the online sticker for bus ticketing industry was perceived to be almost impossible even by these major players in e-commerce. This reckon deals with how a disruptive model derriere compound the scenario of the complete industry. redBus which at the time of its inception was confined in a small smooth of 2 rooms is now a 400 million caller-up with oer 400 employees and offices across India. flow rately it is the further major player concentrating completely on bus ticketing industry with a foodstuff address of over 70%. In this dupek, I wipe out tried to conk out the bus ticketing industry and how redBus identified the opportunities present in this segment and created a re jimmy chain which non but gave them a distinct fruit tho withal at emulous toll. It is a perfect simulation of spirited naval outline where ent ry of redBus changed the entire realmscape of the industry. It revolutionized the expression the people buy bus tickets in India. One of the unique bus ticketing clay of its kind in the entire macrocosm, competitors energise leaped in this trade but n iodin has received success alike redBus. This cogitation besides covers how redBus has sustained its agonistical think ofs and what atomic look 18 the scraps and return opportunities going forward.CHAPTER-1 INTRODUCTION Blue nautical outlineAs the authors of the book Blue naval remains, W. Kim Chan and Renee Mauborgne learn Although the consideration racy ocean is discardd, their existence is not. They have been a pause of argument transformation in past as advantageously as in present. If we look back in the past say a century ago, How many of todays industries were then cognise? The answer exit be majority of todays industries were unknown in their current form. Many industries such as automobiles, avi ation, health c are, and management consulting were unknown or were just beginning to emerge. flat lets look at the industries 3 decades back. Again, multibillion-dollar industries like mutual funds, computers, mobile ph unitys, forward-looking phones, gas based power plants, discount sell, biotechnology, nanotechnology, express parcel delivery, chocolate bars, video games, home videos, and CD player and many other such industries were all non-existent in a practical or popular agency.Similarly, lets originate the clock forward a bit and try to look into the future. Lets say after 30 eld or say 50 years how many of the now unknown industries will emerge and will exist. If account statement is any indicator of things to add in future, the answer is there will be many such industries that we cant even think of right(a) now which will emerge.This is the reality industries are dynamic. They never remain the very(prenominal) over a coarse period of time. They change continu ously and evolve. The participants, the passage, the mart and the operations everything changes. Operations improve, markets evolve and puzzle, and non-customers be stick to customers. History tells us that we have huge authorisation to change the existing industries and recreate them and not only that it t all(prenominal)es us that we underestimate our capability to create tonic ones. To have an thinker of how dynamic things can get, the 50-year old specimen Industrial Classification ( pose) brass, which was make by the U.S. Census, was substituted by the North America Industry Classification Standard (NAICS) system in 1997. The reason being the total of industry sectors that mark covered were half the number of sectors that actually existed in 1997. The old SIC system covered only 10 industry sectors. The youthful NAICS system doubled it to twenty sectors to reflect the emergence of new-age industries. For example earlier the service sector included all that is now fra gmented into diametrical vary industries like IT, healthcare, social assistance, etc. Given that these systems are made to look into stability, continuity and for keeping standards, such a substitution shows the significance of growth of Blue Ocean industries. so far the dominant emphasis of strategists has been on competitive strategies too known as red ocean strategies. Part of the account statement for this is that its roots in military system heavily influence bodied strategy. Strategy is about repugning different competitors over the s attention(prenominal) subject field of land that is constant and not unlimited. Unlike battles though, the history of industry tells us that the world of market is unlimited and there is a place for everyone rather, piquant oceans have been always in existence. They have continuously been created. To believe and engage oneself to red ocean is therefore to accept the constraints that are associated with war-limited gentlemans gentlem an of land and the need to fight and defeat an opponent to succeed-and to reject the unique attitude of the occupation world the capacity to create new market universe that is uncontested.Blue Ocean v/s Competitive Strategy (Red Ocean)Blue Ocean emphasises the importance of take account cornerstone that can completely run afoul the competition replacing competitive advantage with revalue innovation as the riotouss primary goal hence high spot the importance of creating demand and exploiting untapped maket rather than risking competition.There is a parameter in the academia and explore groups as to which strategy is better suited but all evidences are as case studies on different companies which is not enough to find any one of the cardinal strategies as a clear winner. alternatively the two strategies co-exist and should co-exist because a firm on the foundation of Blue Ocean strategy may ultimately have to face competition depending on the imitability of the business model and then before they have more value innovation to differentiate themselves and still remain embody competitive, they must as well as have a competitive strategy to ensure they do not fall behind of competition.Research results of researchers like Andrew Burke Andres van Stel and Roy Thurik purpose that the effect that blue ocean makes competition irrelevant may not be true.When combined, the two win a more holistic and naturalistic depiction of economic cognitive outgrowth. Thus, in real behavior the any strategy must be adopted after evaluating the business and market muckle appropriately as these see the degree of scope for effectiveness of all Blue Ocean or competitive strategy. Furthermore, what emphasis and mix should be habituated to either form of strategy across unretentive and long-term time horizons is apparent in most innovative companies competing in short term red oceans while significant time and resources are utilize to the long-term goal of de veloping innovation that creates consumer demand and new markets. interpret 1 Red Ocean v/s Blue Ocean Strategy first www.blueoceanstrategy.corporatestrategy.comBlue Ocean and pureness SpaceThe term white space has been used in business parlance to mingy uncharted territory or an underserved market. But as Mark W. Johnson abruptly writes in Seizing the White Space the term is the lay of potential activities not defined or addressed by the familys current business model, that is, the opportunities outside its core and beyond its adjacencies that require a different business model to exploit. White space is a subjective valuation one companys white space may be another companys core.What matters is that it describes activities that lie faraway outside a firms usual way of working and presents a series of unique and perplexing challenges to that organization. Its an area where, relatively speaking, assumptions are high and intimacy is low, the opposite of conditions in the comp anys core space.The chance to seize a piece of white space presents a tantalizing opportunity. Success here can bring the transformational growth that so many business leaders seek. Yet understandably, a play for the white space feels risky, and often the numbers dont appear to add up. The market seems too foreign, or core capabilities wont apply. virtually executives, having made one unsuccessful foray, just wont risk impuissance again.Figure 2 White SpaceSource Seizing the White Space, Mark W. JohnsonBlue Ocean Strategy and Applied ConceptsThe Strategy mainsheetThe strategy mainsheet is the central diagnostic and action framework for make a compelling blue ocean strategy. The horizontal axis captures the range of factors that the industry competes on and invests in, while the vertical axis captures the offering train that purchasers receive across these entire light upon competing factors.There are two purposes that are served hereIt captures the current state of play in k nown market space, which allows users to clearly see the factors that the industry competes on and where the competition shortly invests.Then, it propels users to action by reorienting focus from competitors to alternatives and from customers to non-customers of the industry.The value curve is the basic segment of the strategy canvas. It is a graphic depiction of a companys relative performance across its industrys factors of competition. A strong value curve has focus, divergence as well as a compelling tagline.Figure 3 The Strategy Canvas quadruplet Action FrameworkThis framework can in any case be referred to as the Eliminate-Reduce-Raise-Create Grid. To reconstruct buyer value elements in crafting a new value curve, we use the iv Actions Framework. As shown in the diagram, to grass the trade-off between differentiation and low cost and to create a new value curve, the framework poses foursome key headings to challenge an industrys strategic logic and business model.Which o f the factors that the industry in scram tax returns for granted should be eliminated?Which factors should be trim back well below the industrys standard?Which factors should be raised well supra the industrys standard?Which factors should be created that the industry has never offered?Figure 4 Four Actions FrameworkBy pursuing the first two questions managers gain cortical potential into how to drop their cost structure vis--vis competitors. Rarely do they systematically put up out to eliminate and reduce their investments in factors that an industry competes on. The result is acclivity cost structures and complex business models. The other questions provide insights into how to lift buyer value and create new demand. Collectively, they allow exploring how to reconstruct buyer value elements across alternative industries to offer buyers an entirely new experience, while simultaneously keeping your cost structure low. Eliminating and creating are vital as they energy companies to go beyond value maximization exercises with existing factors of competition. They prompt companies to change the factors themselves, hence making the existing rules of competition irrelevant.Plan-Do-Check-Act (PDCA)The PDCA Cycle is a checklist of the four peaks, which one must go through to get from problem-faced to problem solved.This innovation was developed by Walter Shewhart, the pioneering statistician who developed statistical process carry in the Bell Laboratories in the US during the 1930s. It was taken up and promoted very effectively from the 1950s on by the famous Quality centering authority, W. Edwards Deming. Consequently, PDCA calendar method is also commonly known as the Shewhart Cycle and the Deming wheel.This cycle diagram can be utilise in team meetings to take stock of what correspond avail initiatives are at, and to choose the appropriate tools to see each stage through to successful completion.Here is what we do in each stagePlan to improve operation s first by finding out what things are going wrong (that is identify the problems faced), and come up with thinkings for solving these problems.Do changes purposeed to solve the problems on a small scale first. This minimizes disruption to routine activity while scrutiny whether the changes will work or not.Check whether the small scale changes are achieving the desired result or not. Also, continuously Check nominated key activities (regardless of any experimentation going on) to know what the quality of the output is at all times to identify any new problems.Act to follow up changes on a bigger scale if its successful on small scale. Also Act to involve other persons (other departments, suppliers, or customers) affected by the changes and whose cooperation is needed to implement them on a larger scale.If the experiment was not successful, skip the Act stage and go back to the Plan stage to come up with some new ideas for solving the problem and go through the cycle again. Plan- Do-Check-Act describes the overall stages of improvement activity, but how is each stage carried out? This is where other specific quality management, or continuous improvement, tools and techniques come into play. The diagram below lists the tools and techniques that can be used to complete each stage of the PDCA Cycle.Figure 5 PDCA CycleVRIO FrameworkVRIO is an acronym for place, Rarity, Imitability and Organization. This is also a 4 questions framework where one asks about a resource or capability to ascertain its competitive potential the question of Value, the question of Rarity, the question of Imitability (Ease/Difficulty to Imitate), and the question of Organization (ability to exploit the resource or capability).The foreland of Value Is the firm able to exploit an opportunity or pine away an external threat with the resource/capability?The Question of Rarity Is suppress of the resource/capability in the hands of a relative few?The Question of Imitability Is it difficult to imitate, and will there be significant cost disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?The Question of Organization Is the firm organized, ready, and able to exploit the resource/capability?The VRIO framework, in a wider scope, is part of a much larger strategic scheme of a firm. The basic strategic process that any firm goes through begins with a vision statement, and continues on through objectives, inseparable external analysis, strategic choices (both business-level and corporate-level), and strategic implementation. The firm will hope that this process results in a competitive advantage in the marketplace they serve in. VRIO falls into the internal analysis step of these procedures, but is used as a framework in evaluating just about all resources and capabilities of a firm, regardless of what phase of the strategic model it falls under.CHAPTER-2 LITERATURE reappraisal cover 1Blue Ocean Strategy versus Competitive Strategy The ory and Evidence. Burke, Andrew, Andr van Stel, and Roy Thurik. ERIM Report Series Research in perplexity (May 2009)Theme Empirical analysis of blue ocean strategy versus competitive strategies based on data assembled from 655 retail crops through 41 shop types in the retail industry in Holland.Summary This paper addresses the debate surrounding Red Ocean (competitive strategy) v/s Blue Ocean ( unsanded Market) strategy. The authors note that Blue Ocean seeks to emphasise the importance of value innovation that can completely negate the competition replacing competitive advantage with value innovation as the firms primary goal thus highlighting the importance of creating demand and exploiting untapped maket rather than risking competition. This results in increased favourableness in the industry.There is a debate in the academia and research groups as to which strategy is better suited but all evidences are as case studies on different companies which is not enough to define any o ne of the two strategies as a clear winner. quite a the two strategies co-exist and should co-exist because a firm on the foundation of Blue Ocean strategy may ultimately have to face competition depending on the imitability of the business model and then before they have more value innovation to differentiate themselves and still remain cost competitive, they must also have a competitive strategy to ensure they do not fall behind of competition.Research results in this paper suggest that the notion that blue ocean makes competition irrelevant may not be true. To test the superiority of either tools the authors looks at the two strategies from both long term and short term perspectives and outline a theoretical model which suggests that every market will experience new vendors arriving to share the cabbage that are there on the offering in the industry. Thus the account of the pie chart of market share will continuously exhibit different set of players with some fading off while others entering the market but only until the saturation point is reached where everyone will break even. flavor at the industry an its players over a period of time in this manner will give us an understanding about whether the new market strategy or the competitive strategy is more operable for the industry. If companies succeed over a long period of time by creating value innovation (new market strategy) as the new companies entered, both the industry profits as well as the firms profit will grow steadily and so will the number of vendors in the strategy. On the other hand, if the profitability of the blue ocean firm went down with increasing number of vendors in the industry, it would be an indication of the dominance of the firms that followed competitive strategy over the firms that followed new market (blue ocean) strategy. After studying the complete data from 1982-2000 of 655 retail shops over 41 shop types in the Dutch retail industry and after testing and analyzing the premise the authors cerebrate for half the shop types, the firm profits were directly proportional to the number of firms while the blue ocean strategy was dominant over a long term with number of vendors and firm profitability rising/falling together over all shop types in the whole period under consideration. The authors also concluded that in short term Red Ocean strategies were at work.The study highlights that the two strategies co-exist and cross each other throughout the industry life and there is no particular choice that any manager prefers.Paper 2Synthesizing a Blue Ocean. Master Thesis. Vester, Daniel. Aalto University, 2012.Theme Applicability of New Market strategy frameworks and techniques in the electronic melodic performers industry for innovating new products.Summary In this paper, the author targets to show how value innovation could be used in case of an electronic musical instrument company to add value to their product and create new market space. To relieve this, he choses to compare the traditional strategies like competitive strategy, Porters 5 forces strategy to the blue ocean strategy. Blue ocean strategy is eventually selected for the process of product development of ArturiaMiniBrute, an analogue synthesizer reason being1) Its prudence on constructing new uncontested market space and at the same time targeting lower cost and product differentiation as well and2) The ease with which the analytical tools and frameworks in a Blue Ocean strategy could be blended into the product development process and usability of the instrument thus developed.Blue ocean strategy tools such as the Strategy Canvas, Four Action Framework, Buyer Utility Map and Three Tiers of Noncustomers are applied after quantitative analysis of sales figures in the electronic musical instrument industry for identifying Arturias closest competitors in various synthesizer markets and to design the strategy for ArturiaMiniBrute.The authors observations and interpreta tions show that the Blue Ocean Strategy techniques and frameworks can aid electronic musical instrument firms add value to their instruments/products/offerings and create new market space. Subsequently, the author advocates that companies should shift focus from technical features of the musical instrument to the emotional appeal of the musical instrument, and urges that companies should get out of the traditional mindset, challenge established rules of the industry by eliminating factors that have been ignored and not given due importance but which may be of great value to the customer.Paper 3The Impact of Blue Ocean Strategy in Low-cost Transport. tverkov, Hana, Michal ervinka, and Vlasta Humlov. In 2012 International Conference on Traffic and transit Engineering. Belgrade, November 29-30, 2012.Theme Applicability of blue ocean strategy theory to Ryanair (air take industry)Summary This paper illustrates how blue ocean strategy can be vital and have an important influence in the low cost aviation sector. The authors chose to analyze the low-cost air transport industry in the European Union. They report that the market is highly competitive and the regional players fight amongst themselves on the base of cost competitiveness. The authors show that a cordial family between regional airports and any carrier firm can alter figure airlines to provide distinguished value for airline passengers at a low cost to the companies. The authors also suggests using the case of Ryanair that infrastructure improvement for non-core activities at the smaller airports might be essential to facilitate such relationships between budget airlines and small regional airports.CHAPTER-3 EXAMPLES OF BLUE OCEAN strategy line of products AsiaOne of the major developments that the airline has experienced has been the evolution of the budget airlines. For instance, emergence of Air Asia in Malaysia is a classic example.Air Asia have avoided the competitive strategy or the red Ocean (c ompetition against Malaysia Airline and other airlines like Tiger Air, Jet Air and other regional airlines) by considering factors that are important to customers but easily taken for granted by most of the other airlines. With the Four Actions Framework proposed by W. Chan Kim and Renee Mauborgne, Air Asia have ensured they make Malaysia Airline, Tiger Air, Jet air and regional players irrelevant by implementing many important strategic moves explained below.STRATEGYEliminate1) OTC reservation2) Seating Class booking arrangement3) Free breakfast/ dejeuner/dinner on the planeReduce1) Number of attendants serving on the plane2) Luxury facilities delivered3) Quality of the seatsRaise1) Increased leakage hours for their aircrafts frequency of flight2) Selected key endpoints/destinations catered frequentlyCreate1) Booking system became online2) Travel system point-to-pointThrough these strategic moves, Air Asia has been able to turn on factors that really matter for the customers lik e better booking channel, point-to-point last system, etc. that makes customers lives simpler and adds value to them. This is a perfect example of Value Innovation, as not only does this help Air Asia increase the value to the customers but at the same time reduces cost for Air Asia significantly Value Innovation. This also allows Air Asia towards customers who were not traditionally target thus creating a new market space and targeting non-customers in the traditional airline industry.Current Airline Customers1) Corporates and business fraternity in Malaysia or ASEAN region.2) Those individuals who can put up with to buy expensive airline tickets from airlines like Malaysia Airline and other regional players.Non-Customers1) Officers from the government and other government staff2) Those individuals who cannot afford to buy expensive tickets such as students or recent graduates or lower fondness class and rural people.With effective execution of Blue Ocean strategy, Air Asia has furthered expanded their gamut and has ventured into other businesses like they started Tune Hotel and Tune Money. The model is again towards creating Blue Ocean market space.Crocs Inc.Company SnapshotCrocs Inc. is one of the major players in shoe industry who have been very successful. It designs, fabricates and markets bright-colored, comfy-branded footwear and accessories for all segments men, women and children.Blue Ocean Strategic MoveCrocs Inc. with its distinctive lightweight clogs created a blue ocean market space in the shoe industry. These types of seat gave customers a perfect combination of relaxation and fashion at an cheap price point. Crocs lieu have mass appeal because not only are they branded but also in a way they are refreshing, they are different from traditional sandals and casual shoes and add a fun element as well as they come in a wide array of bright colors which provide a funky look. Combined with their new crocodile logo on their shoes it also gives them a bold look. Crocs have been a run-away success also because they provide customer what they never even thought of, they satisfy their customers by adding value to their customers usage by heavy(a) features like lightweight, waterproof, ergonomic comfort and anti-microbial and anti-skid.SuccessFounded in 2002 as a new type of boat shoemaker initially, the company has grown into a global sensation in casual footwear industry with sales across the globe in over 90 countries and reaching 1 billion US dollars in 2011.Figure 6 Crocs Four Actions to create Value InnovationSource Frontier Strategy, LLCNintendos WiiThe video game business has a huge market and is a multi-billion dollar industry. Video consoles, which form a big portion of this market, were very recently in the past controlled by two major players PlayStations (PS12 and soon PS3) from Sony and Xbox (Xbox and Xbox360) from Microsoft. Nintendo, however, a distant third player created ripples in the market space with its launch of the Wii. This is an especially interesting case study from a strategy perspective since its a brilliant example of the so-called blue ocean strategy. The graphic below demonstrates Nintendos Wii strategy with the help of the strategy canvas and is quite clear.Figure 7 The Strategy Canvas of Nintendo WiiOn giving a closer glance to the above graphic, one will billhook that Nintendo is competing on a completely different strategic landscape as the attributes are completely differently focused for Nintendo in comparison with Sony and Microsoft. The Wii is not only affordable for general public, it has no Hard Disk, no DVD, no Dolby 5.1, weak connectivity and comparatively low processor speed, but enthralls the user by its innovative motion control stick. The stick is designed such that it integrates the movements of a player directly into the console of the video game, The user gets an interface where he gets a live feel of himself playing in the screen. With this feature N intendo not only won the existing customers in the video game world but also brought in a completely new set of customers to the business.We can again think of the Four Actions Framework in all of the above descriptions of features. I will explain here with a cope with of those featuresReduction in cost through elimination of some features like Hard Drive, DVD, Dolby 5.1 and low processor speedA raise in demand by creation of motion stick strong value innovation for new gamers/customers.These 2 features disregard the traditional belief in competitive strategy of either going for cost leadership or product differentiation and not simultaneously for both. In other words, through this example we see that while Sony and Microsoft are fighting in the same old bloody Red Ocean of existent market, Nintendo created a new market space for itself in the form of Wii and is now sailing calmly in this Blue Ocean that it created for itself.CHAPTER-4 BOS A Case theatre of operations on redBusSt ory of redBusOne fine evening an electrical coordinate in Bangalore planned to proceed to Hyderabad to celebrate Diwali with his family but the answer he got from the agents when he reached at bus stands was that all tickets were sold out and he could inquire about the availability from some other agents. Although the person got prevent but an appalling question was making rounds in his minds why werent there other methods to get bus tickets booked rather than moving from one agent to another? He questioned why cant bus tickets be booked online like airlines and railway tickets? The person was Phanindra Sama and his frustration lead way to a revolution in Indian bus industry and redBus was innate(p).Phani discussed the idea with his friends (Sudhakar Pasupunuri and Charan Padmaraju) and they started working on the idea. Initially they decided to develop an IT based stock-taking system for bus operators but the idea was dismissed by the operators and agents as the task seemed hug e to them. Meanwhile they came in contact with the Bangalore chapter of attraction (The Indus Entrepreneurs) which reliable their venture and mentored the team and guided them with various assignments pertaining to market surveys and market research. The TIE mentorship enabled redBus to get venture capitalist interested in them and a VC named Seedfund funded them with $500000. This is how redBus was born on 18th August 2006, Indias first online bus ticketing website, a conceit which was in use for airline and railway booking but no one had realized that it could be feasible enough for the bus travel also. Exhibit 1 gives company details.Exhibit 1The Teammajor(ip) MilestonesExhibit 2Company DetailsBus Ticket Industry- Overview in IndiaThe Indian bus travel industry was highly fragmented with a large number of small operators and agents having very little orientation towards technology. approximately of the operators were regional players having small fleets of ten buses where few were long route players having one hundred or more fleets of buses. Exhibit 2 gives the details of the industry structure. foresightful route buses were known as contract carriages and their tickets were to be bought in advance whereas short haul buses known as stage carriers and their tickets were sold in the coach itself. The booking system was agent driven in which each agent had contract with three of four operators and tickets were allocated to them on the basis of quota system by the operators. Each agent used to sell its quota of tickets and all the unsold tickets were informed to the operator before some fixed time of bus departure. No centralized inventory was maintained by either the agents or by operators