Chapter 6

Blue oceans

Untapped market space, the creation of additional demand and resulting opportunities for highly profitable growth

Blue ocean strategy

Business level strategy that successfully combines differentiation and cost leadership activities by using value innovation to reconcile inherent tradeoffs

Business-level strategy

The goal directed actions that managers take in that quest for competitive advantage when competing in a single product market

Cost-leadership strategy

Seek to create similar value by delivering products or services at a lower cost than competitors

Differentiation strategy

Create higher value for customers than their competitors create at similar costs

Diseconomies of scale

Increases in cost per unit as output increases

Economies of scale

Decrease in cost per unit as output increases

Economies of scope

Doing different things together because they can share resources

Experience curve

Reductions in per unit production costs resulting from improvements in tech and process

Focused cost-leadership strategy

More narrow scope of cost leadership

Focused differentiation strategy

More narrow scope of differentiation

Minimum efficient scale (MES)

Output range needed to bring down the cost per unit as much as possible

Red oceans

Known market space of existing industries

Scope of competition

Whether to pursue a specific, narrow part of the market or go after the broader market

Strategic forbearance

Choosing to compete in distinct market segments while deliberating avoiding others

Strategic trade-offs

Choices between between a cost position or a value position

Strategy canvas

Graphical depiction of a company’s relative performance via its competitors across the industry’s key success factors

Stuck in the middle

Strategic position not clearly defined as low cost or differentiation; results from attempts to straddle different strategic positions and lead to inferior performance results

Value curve

Component of strategy canvas horizontal connection of the points of each value on the strategy canvas that helps strategic leaders diagnose and determine courses of action

Value innovation

Aligning innovation with total perceived consumer benefits, price and cost

Veblen effect

Consumers perceive higher priced goods and services as inherently more valuable