20653023 Entry # 13

Blue Ocean Strategy: in details (cont'd)
Today I'd like to summarize chapter about market boundaries.
As you can remember, 'classical model' of formulating business strategy claimed that market boundaries are not elastic and in order to survive you have to fight with others to get bigger share within existed market. And in pursuit of success companies are supposed to do following:
1. Define their industry similarly and focus on being the best within it
2. Look at their industries through the lens of generally accepted strategic groups and strive to stand out in the strategic group they play in
3. Focus on the same buyer group, be it the purchaser, the user or the influencer
4. Define the scope of the products and services offered by their industry similarly
5. Accept their industry’s functional or emotional orientation
6. Focus on the same point in time – and often on current competitive threats – in formulation strategy
Blue Ocean Strategy offers 6 basic approaches how to Reconstruct Market Boundaries.
It called six paths framework. And it’s said that these paths have general applicability across industry sectors. Here they are below:
Path 1: Look Across Alternative Industries
A company competes not only with the other firms in its own industry but also with companies in those other industries that produce alternative products or services. (Alternatives include products and services that have different functions and forms but the same purposes.)
Company which applied this path: NetJets with its fractional jet ownership; NTT DoCoMo with its i-mode
Path 2: Look Across Strategic Groups Within Industries
Term strategic group refers to a group of companies within an industry that pursue a similar strategy. Most companies focus on improving their competitive position within a strategic group: Mercedes, BMW, and Jaguar focus on outcompeting one another in the luxury car segment as economy car makers focus on excelling over one another in their strategic group.
Companies which applied this path: Curves (the Texas-based women’s fitness company, franchising), Polo Ralph Lauren, Toyota’s Lexus, Champion Enterprise
Path 3: Look Across the Chain of Buyers
There is a chain of “buyers”: purchasers who pay for the product or service may differ from the actual users, and in some cases there are important influencers as well. And an industry typically converges on a single buyer group. But challenging and industry’s conventional wisdom about which buyer group to target can lead to the discovery of new blue ocean.
Companies which applied this path: Novo Nardisk with its NovoPen and NovoLet; Bloomberg with its terminal and keyboard; Canon with its small desktop copier.
Path 4: Look Across Complementary Product and Service Offerings
Untapped value is often hidden in complementary products and services. Think about what happens before, during, and after your product is used.
Companies which applied this path: NABI with its bus for U.S. Municipal Bus Industry; Philips Electronics with is teakettle in Britain.
Path 5: Look Across Functional or Emotional Appeal to Buyers
Along with scope of products and services competition in an industry tends to converge on possible bases of appeal: rational or emotional.
But challenging the functional-emotional orientation of industry companies often find new market space. Emotionally oriented industries offer many extras that add price without enhancing functionality. So, eliminating those extras may create a fundamentally simpler, lower-priced, lower-cost business model. And vice-versa: functionally oriented industries can often infuse commodity products with new life by adding a dose of emotion what in turn, can stimulate new demand.
Companies which applied this path: Swatch (from functional to emotional), The Body Shop (from emotional to functional), QB House (from emotional to functional), Cemex (from functional only to emotional)
Path 6: Look Across the Time
All industries are subject to external trends that affect their businesses over time. Looking at these trends with the right perspective can show you how to create blue ocean opportunities.
Companies which applied this path: Apple with its iTunes; Cisco Systems (well-timed production for high-speed data exchange); CNN with its real-time 24-hour global news network; HBO’s show Sex and the City.