This management approach, is an approach in which an organization focuses on gaining both a competitive advantage and a favorable position in the marketplace by exploiting the available resources as the environment is stable and predictable (Montego, 2016).
In this write up, the focus will be to analyze the traditional management approach and then further go forward to explain how companies that use this strategic approach end up adopting the Red Ocean business strategy
In the traditional management, first step is usually to create a strategic framework in order to understand where the business is at present. It will provide an overview of both internal and external factors; a clear picture of the organization's position is provided. A statement which states what a business is working towards is created, including a mission statement that defines the organization's drive. The next step the company takes is to develop a breakdown of the vision, which forms the principles that guide team workers within the organization on their ethical roles. Objectives are then set to show the exact manner in which the company is going to make the set vision practical. These objectives are usually precise, can be measured, achievable, and realistic as well as based on time. The company then goes ahead to look at the challenges they could be going through and could hinder not attaining the objectives.
Creating strategies is the next step, and it is crucial since this is when the organization analyses the objectives and problems and decides the most appropriate ways to move from point to point towards the set vision. After coming up with the strategies, the organization then goes ahead to evaluate them and finally come up with a plan that is both suitable and feasible. This strategy can then be implemented; however, without proper execution, no Strategy can succeed. Communication is essential, as colleagues need to recognize the mission and priorities of the organization at all levels to help them in regards to the plan and how it will be executed. Also, the management ought to be on the same page. Likewise, continuous monitoring is also essential: in the event, there is a need to correct the direction in the short term when things begin to lean off, and even in the long run, because conditions can rise or fall in a manner that affects the long-term vision (Smyth, 2019).
Companies that adopt the traditional management approach method adopt the Red Ocean strategy as well . In this management approach, companies focus on external factors like competition and make strategic decisions based on the same. An organization that adopts the Red Ocean model will focus on competing in the market, gaining a favorable position in the market, and it will also aim at beating its competitors. Companies that adopt this strategy will opt to invest in coming up with very high-quality products to outdo its competitors (Tuttle, 2020). One instance of an industrial sector that a business will need a Red Ocean plan is the soft drinks sector. This industry has been present for a long time, and entry barriers are high. There are industry leaders like Coca-Cola Company and PepsiCo in place, and there are also several smaller firms in market share competition.
The Blue Ocean Strategy
The blue ocean strategy is a combination of exploration of innovation and lower cost of opening up a new market sector and the ability to generate demand. This is about developing and securing uncontested consumer space, thus rendering competition insignificant (Smith & Joe, 2019). It is founded on the perception that market dynamics and business structure are never given and can be rebuilt by the behavior and opinions of business players.
This model of strategic planning sets out from the standard way of management, which focuses on crunching numbers and comparing a company's progress with its competitors.
Unlike other strategic planning models that are based on assumptions, which may not quite work out when executing them in the market, blue ocean strategy is based on data that is proven. The research was done ten years ago on more than thirty industries, and the focus was on their successes and failures.
The Blue Ocean plan also focuses on value innovation, where it contends that buyers should not choose between quality and affordability. However, if a business can understand what customers want and then consider how to deliver that need, it can achieve both differentiation and reduced cost. Also, the Blue Ocean Invention test is part of the overall plan, which helps companies to check the market feasibility of ideas. This system helps to enhance concepts and find the concept that has the most potential while mitigating risk (Tuttle, 2020). An example of a blue ocean was when iTunes came on the market, solving the issue of customers downloading pirated music from the music industry and, at the same time, meeting the need for digital, a subscription service for songs. iTunes Blue Ocean Strategy created an entirely new music sales category that allowed musicians to benefit and audiences to purchase single tracks versus a whole collection.
The first tool that a business can use in looking for blue oceans is through identifying its first-tier non-users, these are the consumers who purchase the products in an industry limitedly out of necessity but are psychologically non-users of the industry. Most significantly, if a business can give them a change in value and meet their needs, they will not only remain with the company's new solutions but also the buying frequency of these users will increase, revealing a vast hidden demand (Wah, 2017).
The other explorative tool for blue oceans that a company could use is through identifying those consumers who deliberately reject the product offered in the industry. They are called second-tier non-users since they are the customers who identified such goods or services as alternatives to meet their needs but opted against them. An investor ought to ask themselves how he or she should be able to open up a market that is big and profitable to be able to capture this type of consumer. An example is where Uber makes a fortune off the individuals who felt that they would rather walk than use a taxi (Simon, 2017).
The other type of tool to use the third tier user; This is the type of users who are further away from the existing market of a specific product, and have never had a thought of the products being offered. A business investor ought to think about how he could pull this type of consumer to his product (Simon, 2017).
An investor should note that irrespective of what category a non-user individuals could be, there are those everyday needs they share, and can create a whole new market from the needs since that is how Blue Ocean demands are created from such analysis. However, an investor should have a broad perspective of thinking (Simon, 2017).
Offering photos or objects to non-users and having them to create stories around such things that explain how they solve a problem. Either through bringing non-users together or holding sessions individually with the group of non-users is useful, because they can help a business create a concept of a solution for them, a product or service that can help in addressing their unmet needs (Wah, 2017).
A business could also use the visual exploring tool to identify a blue ocean: by sending some of its employees to the field to spend a few hours with the users of their products. And see how the consumers are solving their problems and whether they are choosing their products to solve the problems they have. Through this, the staff will get to observe what the users are dissatisfied with. The company could also choose to research through observation by watching how people do things like how they spend time in stores to dining in cafes. When you begin to observe, all kinds of great ideas can arise, and particular needs that have not been met (Simon, 2017)
An investor can develop a blue ocean by listening to the different stories of people and how they get things done. It is through these stories that one can get essential understandings into their unmet needs, which can then guide an investor into new markets that are untapped (Wah, 2017).
The other tool that could be used in looking for a blue ocean is through strategy canvas, a vital analytical tool, and the most robust basis for an action plan to develop a coherent blue ocean strategy. It graphically portrays the current business landscape and future opportunities for businesses (Simon, 2017).
How are business models are an alternative to the traditional strategy models and tools, and business models will be tackled in this section. Also, this write up will highlight the difference between Business Model Innovation and product and process innovation
A Business Model is a theoretical framework that promotes a company's feasibility and its product as well as describes how the business run, makes a profit through specifying its place in the value chain, and also how it aims to accomplish its set goals (Ribana, 2020). All the business processes and measures that a company embraces and precedes are part of what is comprised in a business model. According to Peter Drucker (1990), a business model should answer who the customer of the company is and what value it can add to the customer at a reasonable cost.
In easier terms, a business model is an analysis of what costs and expenditures a company ought to pay for the production of goods or services and how much it is going to charge. A good business model simply tries to raise more consumer money than it costs to produce the product. This is the profit as simple as this. For a new business, there would not be a need to develop new models to have an effective strategy. Instead, the company could lower its manufacturing costs; the company could also come up with more effective methods of sales and marketing or come up with an innovative way for its customers to pay (Ovans, 2017).
Equally, the business could take an existing business model and offer it to its customers. Advertising is one of the business models that a company can adopt: the principles of this model is to produce content that the general public will want to watch or see and would then present the advertisements to the readers or viewers. In this model of business, there are two groups of people that ought to be pleased: viewers of the content, and the company advertised for (Bicker, 2016). Often this model is paired with the crowdsourcing model where the business can get the content free from its users, rather than charging content creators to create content (Lang, 2012). An example of advertising model is YouTube, and the main merits of this model are that it is quite simple while the disadvantage is that it is quite a risky process mainly when the business solely relies on this model type to generate revenue (Bicker, 2016)
The other kind of business model is crowdsourcing, which is basically when a company can bring a large number of people on its website to contribute to the content. Companies who seek to address challenging problems also freely publish their issues for others to try to solve. Reasonable solutions get rewards, and afterward, the business can flourish. The key to a good crowdsourcing company is to have the right incentives to dr...
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