Red Ocean vs Blue Ocean Strategy

Red Ocean and Blue Ocean Strategy

• Red Ocean Strategy: Compete in existing market space, beat competition, and exploit existing demand.
• Blue Ocean Strategy: Create uncontested market space, make competition irrelevant, create and capture new demand, and break the value-cost trade-off.
• Red Ocean Strategy: Focus on market competing strategy, try to outperform rivals, and reduce costs.
• Blue Ocean Strategy: Follow value innovation, drive down costs while driving up buyer's value, and use a whole system approach.

Internal Analysis

• Why Internal Analysis Matters: Determine if a firm's resources and capabilities are of competitive advantages, establish strategies that will exploit any sources of competitive advantage, and provide a comparative look at a firm's capabilities.
• Resources: Assets employed in the activities and processes of an organization, cover a spectrum of individual, social, and organizational phenomena, can be obtained externally or internally generated, and can be tangible or intangible.
• Capabilities: Emerge over time through complex interactions among tangible and intangible resources, based on developing, carrying, and exchanging information and knowledge through a firm's human capital, and foundation of capabilities: unique skills and knowledge of firm employees.

Value Chain Analysis

• Inbound Logistics: Activities used to receive, store, and disseminate inputs to a product.
• Operations: Activities necessary to convert the inputs provided by inbound logistics into final product form.
• Outbound Logistics: Activities involved with collecting, storing, and physically distributing the product to customers.
• Procurement: Activities completed to purchase the inputs needed to produce a firm's products.
• Technological Development: Activities related to process equipment, basic research, product design, etc.
• Firm Infrastructure: Activities that support the work of the entire value chain.

SWOT Analysis

• Captures the concept of strategic fit between a company's internal and external environment.
• Strengths: Identify opportunities to capitalize on changes in any of the 5 forces, identify main sources of competition, and build a strong market position.
• Weaknesses: Identify areas where the company is vulnerable, and determine how to address these weaknesses.
• Opportunities: Identify external opportunities that can be leveraged to gain a competitive advantage.
• Threats: Identify external threats that can impact the company's performance and determine how to mitigate these threats.

Business Level Strategy

• Why do some firms outperform others and enjoy advantages over time?
• Business level strategy addresses the question of how a firm will compete in a particular industry.
• Generic strategy: Way of positioning a firm within an industry, focusing on generic strategies allows executives to concentrate on core elements of a firm's business level strategies.
• Types of generic strategies: Firm's source of competitive advantage, firm's scope of operations, and stuck in the middle.
• Cost leadership: Offers products or services with acceptable quality and low price.
• Focus cost leadership: Competing based on price to target a narrow market.
• Focus differentiation: Unique features that fulfill the demands of a narrow market.
• Differentiation: Based on uniqueness rather than price, and seeks to attract a broader market.

Corporate Level Strategy

• Definition: Actions a firm takes to gain an advantage by selecting and managing a group of different businesses.
• 2 main concerns: What businesses the firm should be in, and how the firm should manage different business units.
• Diversification: Using expertise and knowledge gained in one business to diversify into a business where it can be used in a related way.
• Moderate-to-High levels of diversification: Low level of diversification: Single business strategy.