HOS801 – Strategic Management in

Tourism and Hospitality

Topic Six – Blue Ocean Strategy

5 – Business and Functional Strategy

 Business Strategy is the core strategy.

 The relationship between customers and business-level strategies in terms of
who, what and how.
 Porter’s three generic strategies and the five business strategies
Cost Leadership
Differentiation
Focus – Focused Cost Leadership
– Focused Differentiation
Integrated Cost Leadership and Differentiation strategy.
 Functional strategy is developed at the business process level within the
operating divisions of the firm and are the action plans that each division must
deliver to support the business and corporate level strategies of the firm.
Finance Production Information Technology
Marketing Human Resources Research and 3

Development
Learning Objectives
 Explain the development of Blue Ocean and Red Ocean strategy.

 Define the elements of Blue Ocean and Red Ocean strategy.

 Analyse the Four Actions Framework.

 Understand Value Innovation within Blue Ocean strategy.

 Corporate examples of Blue Ocean strategy.

 The Strategy Canvas and Cirque de Soleil.

 [yellow tail]

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Blue Ocean Strategy

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Blue Ocean Strategy
 Redefining the nexus between cost leadership and differentiation.

 Unknown market spaces that have not, as yet, been subjected to competitive forces.

 Historical perspective of industries such as –

Automotive
Aviation
Pharmaceutical

and more recently –

Computing
Mobile Telephony
Internet

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Blue Ocean Strategy
 The vast majority of new ventures represent extensions of, or
improvements to, existing industries.

 Compelling evidence that where new markets and/or new industries are
created, there is a significantly greater generation of revenues and profits
when compared to new ventures that are merely extensions of, or
improvements to, existing industries.

 Traditional strategy is focused on competitive positioning and therefore,

focused on competing with existing competition.

 Blue Ocean strategy is about doing business where there are no

competitors.

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Blue Ocean Strategy
 Technology is not necessarily the key driver however, innovation is
important particularly where it creates customer value.

 Blue Ocean strategic success is about enabling strategic vision.

 Blue ocean strategic success creates significant brand equity.

 Successful Blue Ocean strategy never benchmarks the competition.

 Successful Blue Ocean strategy rejects the conventional strategic position

that there must be a trade-off between value (differentiation) and cost,
instead pursuing both low cost and differentiation simultaneously.

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Red Oceans
 The focus is on existing market and industry constructs and the necessity
for competition to not only survive but also to achieve success – this is a
limiting approach and also represents a zero sum game.

 Industry structural conditions are a given and firms are at the mercy of
environmental and economic factors beyond their control.

 This is the structuralist view or environmental determinism.

 Breaking out of Red Oceans requires a re-constructionist approach.

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Blue Ocean Strategy
 Blue Ocean Strategy

https://www.youtube.com/watch?v=8ExRnpy4rPE

 Blue Ocean Strategy

https://www.youtube.com/watch?v=5Xd5lvyWMe8

 Renee Mauborgne on Blue Ocean Strategy

https://www.youtube.com/watch?v=clp-IMpuwaQ

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Red Ocean vs Blue Ocean Strategy

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The Four Actions Framework

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Value Innovation

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Three Tiers Of Non Customers

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Three Tiers Of Non Customers
 Tier One

Investigate dissatisfaction.

Understand commonalities across needs and desires.

 Tier Two

Eliminate access barriers.

 Tier Three

Remove assumptions on customer needs and behaviour.

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Blue Ocean Examples

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Blue Ocean Examples

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Blue Ocean Examples

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Blue Ocean Examples

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Blue Ocean Examples

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Cirque du Soleil Strategy Canvas

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[yellow tail] Four Actions Framework

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[yellow tail] Strategy Canvas

Raise Eliminate Reduce Create

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Group Exercise
• Pick a T&H business that has used a blue ocean strategy.
• Research what they have done in each of the areas of:
• Eliminate
• Reduce
• Raise
• Create
• Create a strategy canvas diagram to present back to the class.
Have a Productive Week!