Blue Ocean Strategy: The Four Actions Framework

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Blue Ocean StrategyThe Four Actions Framework
Jason C. H. Chen, Ph.D. Professor of MIS School
of Business Administration Gonzaga
University Spokane, WA 99258 USA chen_at_jepson.gonza
ga.edu
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Red Ocean vs. Blue Ocean

• RED OCEAN
• It represents all the industries in existence
  today the known market
• Industry boundaries are defined and accepted, and
  the competitive rules of the game are known.
• Competition-based
• BLUE OCEAN
• It represents all the industries not in existence
  today the unknown market
• Is defined by untapped market space, demand
  creation, and the opportunity for highly
  profitable growth.
• Innovation-based
• It is with unlimited business opportunities.

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TYPES of COMPETITION
1. PURE COMPETITION
2. MONOPOLISTIC COMP.
3. OLIGOPOLY
4. MONOPOLY
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The Profit and Growth Consequences of Creating
Blue Oceans
86
14
Business launch
62
38
Revenue Impact
39
61
Profit Impact
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Red Ocean Versus Blue Ocean Strategy
Create uncontested market space
Make the competition irrelevant
Create and capture new demand
Break the value-cost trade-off
Align the whole system of a firms activities in
pursuit of differentiation and low cost.
Figure 1-3 (p. 18)
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Grid
Eliminate-Reduce-Raise-Create
Eliminate
Raise
Reduce
Create
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The Four Actions Framework
IS/IT Role?
Which factors should be ________ well below the
industrys standard?
Which of the factors that the industry takes for
granted should be _________?
Which factors should be ________ that the
industry has never offered?
A New Value Curve
Which factors should be ______ well above the
industrys standard?
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Eliminate-Reduce-Raise-Create GridThe Case of
Southwest Airlines
Eliminate
Raise
Meals Lounges Seating class choices Hub
connectivity
Friendly service Speed
Reduce
Create
Frequent point-to-point departures
Price versus average airlines
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Winners vs. Losers

• What separates winners from losers in creating
  (ultimate) strategic competitive advantage is
  neither bleeding-edge technology nor timing for
  market entry.
• It is from value innovation

utility
Value Innovation
Firm
price
cost
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Value Innovation
Differentiation
Low Cost.
The Simultaneous Pursuit of
and
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Characteristics of a Good Strategy

• Three characteristics of a good strategy
• Focus
• a firm does not diffuse its efforts across all
  key factors of competition
• Diverge
• diverge from the other players
• Compelling Tagline
• strategic profile is clear a fun and simple to
  follow (enjoy)

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Homework

• Describe (find) a business example and employ
  The Actions Framework to create/improve value
  innovation (i.e., strategic competitive
  advantage).
• Both example description and model are due next
  class (using Word).

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• You will be expected to turn in an outline for
  the term paper, a draft, and a final version of
  the paper as indicated on the schedule. You
  should turn in a hardcopy and a softcopy for the
  final paper. Use Times New Roman 12 font, double
  space, page numbers and follow the structure
  (i.e., title page, abstract with key words,
  Introduction, main body, Conclusion, References,
  Tables and Figures), format (especially the
  references) as indicated on the sample papers on
  my web site. It is required to employ appropriate
  models learned from the class to help achieve the
  purpose of your paper. The total number of pages
  should be between 15 and 20 pages.
• At least six references should be cited and three
  of them should be research-oriented (visit
  http//www.gonzaga.edu/Academics/Libraries/FoleyL
  ibrary/IndexesandDatabases/default.htm