Blue Ocean Strategy-Appendix A,B,CMICHAL MEDRANOCASEY HARVEYMASON STONEJULIO GARCIACOURTNEY ELLISGLEN LESLYTRAVIS TEMPELROBERTO PADILLA

Key Topics:• Open New market Space• Value Innovation- Linked to what buyers value• Competition• Buyer Value at an accessible price• Two Distinct Views on Industry Structure• Structuralist Strategies• Reconstructionist Strategy• Reconstruction & Recombination• Market Dynamics of Value Innovation Appendix C• Monopolies

Automobile Industry• Started back in 1893• Woodrow Wilson said " the horseless carriage at the present is a

luxury for the wealthy. It will never come into consumer use as the bicycle.

The Model T• Henry Ford• Revolutionary Assembly Line• Market Share rose from 9% in 1908 to 62% in 1921

General Motors

• 1924

• Strategy- Produce a car for every purse and purpose

• Buyers trade up for fashion and comfort

Japanese Jump Into Blue Ocean

Opportunity• Small, Fuel Efficient cars• Cars made were the Honda, Toyota, and Nissan• Oil Crisis in the 1970's, Consumers flocked the Japanese cars

Chrysler• On edge of bankruptcy• Introduce the minivan• Ignites SUV market

Two Distinct Views on Industry Structure Structuralist View – Has its roots in industrial

organization economicsIndustrial Organization

Reconstructionist View – built on theory of endogenous growth

Joseph A Schumpeter

Structuralist Strategies

Structuralist – important implications often leads to competition-based strategic thinking.Leads to deciding whether or not to enter.

Leads firms to divide industries into attractive and unattractive one.

Decide whether or not to enter.

Reconstructionist Strategy

Recognizing that structure and market boundaries.

Managers & Practitioners do not let this view limit their thinking

Creating Demand

Reordering existing elements

Reconstruction & Recombination

A change in market structure

Stimulating the demand side

Cirque de Soleil

Reconstructing existing buyer value elements

Reconstruction & Recombination

Market Dynamics of Value InnovationAppendix C

Value innovation vs. technology innovation Value innovation rapidly increases demand Lowers price and long run average costs

UnderArmour Submit and Idea

Monopolies

Harm social welfare Charge high prices that exclude consumers Waste society’s resources-deadweight loss

Conclusion:

Auto Industry Structuralist Reconstructionist Value Innovation and Monopolies