Benefits of Blue Ocean strategy as Master thesis topic for my future carrier.

Submitted by Yogesh Gawas (7002778) Proofreading Waseem Shaikh(7001960)

A Mini Paper Submitted to the Faculty of Engineering Master Program of TECHNICAL MANAGEMENT Addresses for the fulfillment of the course of SCIENTIFIC WRITING Submitted to Dipl.-Ing Ms. Sabrina Ernst

HOCHSCHULE EMDEN/LEER Constantiaplatz 4 26723 Emden October 2011

Date: 10.10.2011 WS2011

DECLARATION OF AUTHORSHIP
I confirm that this mini term paper is my own work and is expressed in my own words. Any uses made within it of the works of any other author, in any form (e.g. ideas, equations, figures, text, tables, programs), are properly acknowledged at their point of use. A list of the references used is included. Emden, Germany

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ABSTRACT
This paper gives a brief introduction of what a Blue ocean strategy is and what benefits I will have by choosing Blue ocean strategy as my topic for my master thesis. Blue ocean strategy suggests companies to break away from competition to create uncontested market place. It calls for growing demand breaking away from completion instead of dividing and subdividing existing shrinking market demand. It not only suggest benefits of making competition irrelevant but also gives analytical tools and framework for formulating and executing this strategy effectively. Blue ocean strategy also put forward means to sustain your unique strategy and ways to renew your strategy by value innovation.

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TABLE OF CONTENT
DECLARATION OF AUTHORSHIP ...............................................................................................2 ABSTRACT .................................................................................................................................3 TABLE OF CONTENT ..................................................................................................................4 1.INTRODUCTION .....................................................................................................................5 2 STRATEGY DEVELOPMENT .....................................................................................................6 2.1 Reconstruct Market Boundaries .....................................................................................6 2.2 Focusing on big picture...................................................................................................6 2.3 Reach beyond existing demand......................................................................................6 2.4 Getting strategic sequence right ....................................................................................7 3. EXECUTION PRINCIPLE ..........................................................................................................8 3.1 Overcoming key organizational hurdles .........................................................................8 3.2 Build Execution into Strategy .........................................................................................8 4. SUSTANABILITY AND RENEWAL ............................................................................................8 5.CONCLUSION .........................................................................................................................9 PUBLICATION BIBLOGRAPHY .................................................................................................10

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1.INTRODUCTION
Blue Ocean strategy is all about to leave fierce competition and market share competitors (Red Ocean) behind, by creating a new market, a so called Blue Ocean, where competition. Blue ocean strategy divides market universe in two oceans, Red Ocean and Blue ocean .Red oceans represent all the industries in existence today. This is the known market space. Industry boundaries are defined and accepted, and the competitive rules of the game are known. Blue oceans, in contrast, are defined by untapped market space, demand creation, and the opportunity for highly profitable growth. According to the strategy only the combination of value creation and innovation leads to value innovation, which the basis for a Blue Ocean. This approach can be used best, where costs can be cut and new value can be offered to customers at the same time. According to Blue Ocean strategy the key for added value for customers lies in a four-action-framework, where the following four questions are asked: -Which to date self-evident factors should be eliminated? -Which factors should be reduced significantly? -Which factors should be expanded significantly? -Which factors unknown in the market till now should be newly-created? This way an entirely new product, that differentiates itself on the one hand and can be produced at a lower cost on the other hand, can be created by consistent thought and application. The classic trade-off between value and cost is being breached and a Blue Ocean can be created. In this context an excellent strategy stands out due to three characteristics. Those are : 1) FOCUS on what to be achieved, 2) DIVERGENCE of product to be different than competitors, 3) COMPETITIVE TAGLINE for clear understanding of distinct product. {W. Chan Kim 26-06-2005 #2} There is no industry who has done remarkably well in all point time. Blue ocean strategy does not claim to help for achieving this situation; rather it helps to formulate winning strategy and means to replicate actions leading towards winning situation.

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2 STRATEGY DEVELOPMENT
The four guiding principles for the successful formulation of blue ocean are as follows 2.1 Reconstruct Market Boundaries Blue ocean strategy proposes six paths to reconstruct market boundaries. These are based on assumptions made on study of Red oceans. First is find out alternative industry, second look across strategic groups within industries, third track down chain of buyers and grab the those who initiates it ,fourth search whether any alternative service with main product can catch customers ,fifth is decide an aspect for product i.e emotional or functional and sixth is look across time i.e. look across trends surrounding you , they leads seeds of future, define your strategy accordingly. 2.2 Focusing on big picture It is important for an organization to focus on big picture and not on numbers that are important to carve out strategy. To do this, Visual awakening of senior executives and business managers towards the prospective picture of prospective growth should be done. Visual exploration of field will help top managers to understand exact and real time problems to carve strategy. Visualization of strategy is prominent step in corporate functioning. When different business units will exchange their strategy canvass, discussion on them will help to choose the best amongst them. In the end Communication of strategy should go top down so as to incorporate each level of organization in achieving goal. For doing this various tools such as team building, proper allocation of work, morale enrichment, communication pool can be used.{Prof .Dr. Suresh Kumar Dharmeja 2009 #4} 2.3 Reach beyond existing demand To avoid scale risks - that is the risk of designing a market too small - when creating new markets (Blue Ocean), companies should fully exploit the complete demand potential, by avoiding the two typical mistakes in strategy design: firstly focusing on existing customers, and secondly an ongoing segmentation to do justice to customer wishes . Through a shift in focus, away from existing customers, these mistakes are avoided. Non-customers can be divided in three types:

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 First tier: Soon-to-be Non customers who are on the edge of companys market, waiting to jump in Second tier: Refusing Non customers who decide against your market. Third tier: Unexplored Non customers who are in markets distant from the current industry. {W. Chan Kim 26-06-2005 #2} It is not important which special tier the company focuses on but the management should focus on the tier that promises the biggest success in a defined time. For example we can consider case of TATA NANO. A car manufacturing company TATA from Asia region designed car specifically aimed at middle class of the society, particularly buyers of moped. This untapped segment of market was turned to car owner. This was achieved by eliminating some luxurious features of car and maintaining only important features along with cost reduction ultimately leading to value innovation.{Siddhartha Roy 03-02-2010 #10} 2.4 Getting strategic sequence right The next step is to build a robust business model to ensure that the company can build the idea into a successful business. This step includes inspecting four questions leading to a commercially viable blue ocean idea. Is there an exceptional buyer utility in the companys business idea? Is the price of the product easily accessible to the mass of buyers? Can the company attain the cost target to profit at its strategic price? What are the adoption hurdles in realising the business idea? Are the company addressing them up front to decrease them? If the company could answer all questions with yes a blue ocean idea is viable. All the important three stake holders i.e. employees, business partners and public must be informed about strategy as early as possible, as these group are risk averse. If a company doesnt do that, it has to face confrontation with considerable resistance from these, which can wreck any strategy.

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3. EXECUTION PRINCIPLE
After formation of winning strategy next step is to execute it. Following are two guiding principle to implement Blue ocean strategy. 3.1 Overcoming key organizational hurdles Managers face four hurdles which need to be dealt with. The first hurdle is cognitive. The employees need to be informed about the strategic shift. The second hurdle revolves around the limited resources. Hot spots where resources are needed should be provided and cold spots where excess resources are there should be reduced {W. Chan Kim 26-06-2005 #2}. The motivation of the key players who need to break from their status quo is the third hurdle. The final hurdle is the inhouse politics. To overcome this, pamper lot who is in favour of strategy, silencing lot who is against this. This situation can be achieved by good negotiation techniques. In every company these hurdles exist to varying degrees, depending on the organizational structure and the employees of the observed companies. 3.2 Build Execution into Strategy Overcoming the organisational hurdles to strategy execution is a main step. The company needs to change the attitudes and the behaviour of its people on every management level. A culture of trust and commitment must be created to execute the strategy. The management of the company has to get employees minds and hearts and these must align with the new strategy.

4. SUSTANABILITY AND RENEWAL

Above analytical frame work and execution principle helps to form Blue ocean strategy, but sooner or later it will attract completion and will turn colour of market from blue to red. There are two ways to avoid this; one is sustain your strategy by various means such as patent, brand image, network expansion etc. Second way is renewal which could be done by value innovation. But the question is what exact time for value innovation is? Answer, long as your value curve shows focus, differentiability and catchy tagline you can keep strategy. Also the current income should be enlarged, deepened and stretched. This can happen by optimisation of business processes and business expansion.{W. Chan Kim 26-06-2005 #2}

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5.CONCLUSION
Blue ocean strategy will be able to guide any organisation thinking about its future strategy. As completion is inherent part of any environment, Blue ocean strategy does not deny it. Rather it suggests going beyond competing to obtain high performance in present days over crowded market. Since companies know how to fight in Red ocean as this is something which they have been doing for so long, Blue ocean strategy will help to formulate and execute strategy which will make completion irrelevant. Benefits of choosing blue ocean strategy as my master thesis are that I will understand how to formulate and execute winning strategy; also this is new developed principle so there is still scope of research and development. Within context of present topic, I will be gain new insight of various subjects which I will be studying during course of technical management such as Strategy management, Leadership and negotiation. At the end this study will not only add to my knowledge but also help me to develop myself for bright future.

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PUBLICATION BIBLOGRAPHY
Carsten Siegemund: Blue ocean strategy for small and medium companies in Germany. Development of a consulting approach, pp. 2741. Available online at http://www.wisonet.de/Blue_Ocean_Strategy_.pdf?START=0A1&ANR=667&DBN=DIPL&ZNR=1&ZHW=8&DRMART=2&FSIZE=7&DOMAIN=www.wiso-net.de&WID=45842-2750911-42425_1, checked on 7/10/2011.

Prof.Dr. Suresh Kumar Dharmeja (Ed.) (2009): Management of SME as Blue Ocean strategy for Economic growth. Regional Workshop on SME Development and Regional Economic Integration. Tokyo. ADBI: ADBI. Available online at http://www.adbi.org/files/2008.09.cpp.paper.dhameja.blue.ocean.strategy.sme.dev.pdf, checked on 3/10/2011.

Siddhartha Roy (2010): Emerging markets and blue ocean strategy. TATA group. Available online at http://www.tmtctata.com/Emerging_Markets_and_Blue_Ocean_Strategy.pdf, updated on 3/02/2010, checked on 8/10/2011.

W. Chan Kim, Rene Mauborgne: Blue Ocean Strategy. Boston Massachusetts: Harvard Business School Press. Available online at http://www.sms.org.ir/portal/files/articles/eBooks/BlueOceanStrategy.pdf, checked on 3/10/2011.

W. Chan Kim and Renee Mauborgne (2004): Blue ocean strategy.

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