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.

Learn about the differences between Red Ocean and Blue Ocean Strategies in terms of known vs unknown market space, competition levels, and strategies for sustainable growth. Explore how core competencies and capabilities play a role in shaping a company's competitive advantage.