Implementing Blue Ocean Strategy Term Paper
- Length: 10 pages
- Subject: Business
- Type: Term Paper
- Paper: #56349503
Excerpt from Term Paper :
Strategy Concepts -- From Planning Through Analysis and Implementation
The Concept of Strategy
Strategy is about change and response to change. Competitive strategy cannot stand still (Eisenhardt, 2002). Competitive strategy must establish differentiation (Kim & Mauborgne, 2004). Strategy appears most difficult from the inside of a business as perspective taking is based on what the competition is doing, might do, might do in response to what other businesses do, and so forth (Kim & Mauborgne, 2004). The critical distance needed to truly conceive and implement efficacious strategy is not easily achieved from inside a company -- a factor that has contributed significantly to the financial success of consulting businesses like Bain Consulting, Boston Consulting Group, Deloitte Touche Tohmatsu Limited, and McKinsey and Company.
Businesses face market conditions that are in a continual state of flux, challenging them to construct strategies that are agile, effective, and relevant ("HBR SWOT," 2005). A SWOT analysis can be used to structure the strategic planning process by clarifying the factors that can impede or support a business effort ("HBR SWOT," 2005). A SWOT analysis is fundamentally a review of the internal and external variables that have the potential to influence outcomes ("HBR SWOT," 2005). SWOT is an acronym for the words strengths, weaknesses, threats, and opportunities ("HBR SWOT," 2005). The SWOT process begins with brainstorming sessions that are used to build lists under each of the four categories, delimiting the items on the list to those factors that have relevance to the project under consideration ("HBR SWOT," 2005). The next step in the SWOT process is to expand and contract the list with ideas that serve to limit weaknesses, maximize strengths, take advantage of opportunities, and reduce or avoid threats ("HBR SWOT," 2005).
Generic Approaches to Strategy
Most organizations reach junctures that suggest or strongly indicate that the business model requires changing. To inform this decision, an organization can follow the suggestions of Johnson, Christensen, and Kagermann (2008). The first consideration is to "articulate what makes your existing model successful" by answering the questions, for instance, "What customer problem does it solve?" Or "How does it make money for your firm?" (Johnson, et al., 2008). The next step in this determination might be to, "Watch for signals that your model needs changing, such as tough new competencies on the horizon" (Johnson, et al., 2008). The final step suggested by the authors is to, "Decide whether reinventing your model is worth the effort. The answer is yes only if the new model changes the industry or market" (Johnson, et al., 2008).
Strategic Moves an Organization Might Make
An organization that is interested in making strategic moves that are outside the traditional models and frameworks -- and that are likely to be effective in niche markets -- would do well to consider the strategies outlined in Blue Ocean Strategy (Kim & Mauborgne, 2004). Briefly summarized, these strategies could entail: 1) Creating uncontested market space; 2) Taking actions that make the competition irrelevant; 3) Taking actions that create and capture new demand; 4) Breaking the value-cost trade off; and 5) Aligning the whole system of a company's activities in pursuit of differentiation and low cost. (Kim & Mauborgne, 2004)
One of the ways that Blue Ocean Strategy supports the development of an uncontested market is by considering the six conventional boundaries of competition and not permitting strategic thinking to be constrained by these concepts (Kim & Mauborgne, 2004). The six conventional boundaries of competition include: Industry, strategic group, buyer group, scope of product or service offering, functional-emotional orientation of an industry, and time (Kim & Mauborgne, 2004). The catch phrase is to move from competing within to creating across (Kim & Mauborgne, 2004). A component of the Blue Ocean Strategy is completion of a Strategy Canvas that shows where the organization was functioning, where the competitors in the industry are functioning as a whole, and where the company will function given its new niche-directed, uncontested market position (Kim & Mauborgne, 2004). The axes of the Strategy Canvas area as follows: Y Axis = Offering Level (from High to Low), and X Axis = Relevant Variables (Kim & Mauborgne, 2004). The variables are derived from an analytic component of Blue Ocean Strategy that uses a Four Actions Framework to determine what steps the organization will take, as follows: 1) Eliminate -- Which variables that are taken for granted by the industry will be eliminated? 2) Reduce -- Which variables should be reduced below the industry standard (because they are not that important to consumers in the target niche)? 3) Raise -- Which variables should be raised well above the industry standard (because they are particularly important to the consumers in the target niche)? And, 4) Create -- Which variables should be created that the industry has never offered? (Kim & Mauborgne, 2004). In addition, the Blue Ocean Strategy employs a specific framework for minimizing risks and maximizing opportunities in formulation and executing blue ocean creation.
Effective Strategic Implementation and Action Plans
An effective business model has the following elements: 1) A customer value proposition that addresses a particular need consumers have that competitive organizations do not offer or do not perform as well; 2) a profit formula that includes important components such as a definitive revenue model, a cost structure, profit and operating margins, and inventory turnover; and, 3) key resources. such as personnel, facilities, technology, products, equipment, brand, and intellectual property that enables the business to deliver on their value proposition to targeted consumers (Johnson, et al., 2008). The business mode will also include key processes that enable the enterprise to leverage the resources; these processes can include manufacturing, service, and training (Johnson, et al., 2008). A typical time to reinvent a business model is when a new opportunity emerges that would enable a company to capitalize on new technology or enter new markets by leveraging existing technologies (Johnson, et al., 2008). Another scenario that could drive change in a business model is when an opportunity surfaces that would permit the needs of a large group to be addressed because current solutions are too complicated or too expensive (Johnson, et al., 2008).
Once a decision has been made to make substantive changes in a business model, leadership considerations are paramount (Kotter, 2006). Organizational change is known to be a process that takes time to articulate and evolve. Skilled change managers practice these eight strategies -- in order -- so that the change may be strategically implemented and the action plans may be aligned with the strategy and with the realities of the context in which the change will take place (Kotter, 2006). The eight actions are as follows: 1) Establish a sense of urgency; 2) Form a powerful guiding coalition; 3) Create a vision; 4) Communicate the vision; 5) Empower others to act on the vision; and 6) Plan for and create short-term wins (Kotter, 2006).
To my mind, one of the clearest, most refreshing approaches to business strategy to come along in some time is Blue Ocean Strategy. As the title of the book by Kim & Mauborgne indicates, blue ocean strategy is designed to make the competition irrelevant through the creation of an uncontested market space (2004). This construct of an uncontested market space goes beyond the idea of a niche, which may be just a subset of a larger market that targets a smaller and decidedly different consumer population (Kim & Mauborgne, 2004). Moreover, blue ocean strategy takes the idea of differentiation to the next level (Kim & Mauborgne, 2004). Consumers differentiate products or services according to how well and how differently their needs, desires, and aspirations are met. Blue Ocean strategy creates differentiation beyond what consumers would have imagined and constructed on their own (Kim & Mauborgne, 2004). From this basis, the discussion will consider some of the classic seminal and traditional literature that has served as the basis of business strategy for decades (Kim & Mauborgne, 2004). The additional topic of ensuring that business strategy is current with and relevant to the changing competitive landscape, the impact of disruptive technology, and evolution of consumer and corporate orientation to responsible and sustainable practice (Kim & Mauborgne, 2004).
Eisenhardt rightly identifies globalization as the new force transforming strategy; on point and written over a decade ago, her article now reads post-climactic (2002). In addition, she may have downplayed the influence of the Internet on changed strategy. During the 12 years interim to the publication of her article, both domestic and international trade increasingly rely on digital transactions and communications.
The instability of the markets and geopolitical relations has worsened in many regions in the interim, with even the relative stability of the Euro Zone rocking with the waves from Greek, Spanish, Central European, and Middle Eastern fiscal degradation and conflict (Eisenhardt, 2002). The economic watchwords and phrases that Eisenhardt identified for strategic thinkers included entrepreneurial, disequilibrium, fleeting opportunity capture, and the "relentless cycle of wealth creation and destruction" -- words that, viewed…