Blue Ocean Strategy The Four Actions Framework Jason

Blue Ocean Strategy: The Four Actions Framework Jason C. H. Chen, Ph. D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA 99258 USA chen@jepson. gonzaga. edu ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

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. ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

TYPES of COMPETITION 1. PURE COMPETITION 2. MONOPOLISTIC COMP. # OF FIRMS PRODUCT Characteristics PRICE CONTROL ENTRY To Industry EASY MANY, SMALL SIMIAR SUPPLY & DEMAND MANY, LARGE &SMALL DIFFERENT SOME FAIRLY EASY FEW SIMILAR OR DIFF. A LOT HARD ONE NO SUBSTITUTE REGULATED NO WAY! 3. OLIGOPOLY 4. MONOPOLY ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

The Profit and Growth Consequences of Creating Blue Oceans 86% Business launch Revenue Impact Profit Impact 62% 39% Launches within red oceans ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices 14% 38% 61% Launches for creating blue oceans

Red Ocean Versus Blue Ocean Strategy Red Ocean Strategy Compete in existing marketing Beat the competition Blue Ocean Strategy Create uncontested market space Make the competition irrelevant Exploit existing demand Create and capture new demand Make the value-cost trade-off Break the value-cost trade-off Align the whole system of a firm’s activities with its strategic Choice of differentiation or low Cost. Align the whole system of a firm’s activities in pursuit of differentiation and low cost. Figure 1 -3 (p. 18) ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

Eliminate-Reduce-Raise-Create Grid Eliminate Raise Reduce Create ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

The Four Actions Framework IS/IT Role? Reduce Which factors should reduced well be ____ below the industry’s standard? Eliminate Which of the factors that the industry takes for granted should be eliminated _____? Create A New Value Curve Raise Which factors should raised well above be ______ the industry’s standard? ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices Which factors should created that the be ____ industry has never offered?

Eliminate-Reduce-Raise-Create Grid: The Case of Southwest Airlines Eliminate Meals Lounges Seating class choices Hub connectivity Reduce Price versus average airlines ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices Raise Friendly service Speed Create Frequent point-topoint departures

Winners vs. Losers utility al ig n • 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” Firm Innovation price cost ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices Value Innovation

Value Innovation Costs Value Innovation Customer Value The Simultaneous Pursuit of ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices Differentiation and Low Cost.

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) ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

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). ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices

• 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/Foley+Libra ry/Indexes+and+Databases/default. htm ã John Wiley & Sons, Inc. & Dr. Chen, Information Systems – Theory and Practices