Chapter 6 BPL

Blue Ocean

Untapped market space that is ripe for the creation of additional demand and the resulting opportunities for highly profitable growth.

Blue Ocean Strategy

Business-level strategy that successfully combines differentiation and cost-leadership activities using value innovation to reconcile the inherent trade-offs.

Business-level strategy

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

Cost-leadership strategy

Generic business strategy that seeks to create the same or similar value for customers at a lower cost.

Differentiation strategy

Generic business strategy that seeks to create higher value for customers than the value that competitors create, with unique features but similar costs to those of competing products.

Firms can achieve a competitive advantage by ensuring that its economic value exceeds that of its competitor.

Aims to  increase the price that consumers are willing to pay.an increase in value creation must exceed the increase in costs

Diseconomies of scale

Increases in cost per unit when output increases.

Economies of scale

Decreases in cost per unit as output increases.

Economies of scope

Savings that come from producing two or more outputs at less cost than producing each output individually.

Focused cost-leadership strategy

Same as the cost-leadership strategy except with a narrow focus on a niche market.

Focused differentiation strategy

Same as the differentiation strategy except with a more narrow focus on a niche market.

Minimum efficient scale (MES)

Output range needed to minimize the cost per unit and achieve lowest-cost position.

Red Oceans

The known market space of existing industries, where rivalry among existing firms is intense.

Scope of competition

The size—narrow or broad—of the market in which a firm chooses to compete.

Strategic trade-offs

Choices between a cost position and a value position necessary for managing costs and value creation.

Strategy canvas

Graphical depiction of a company’s relative performance vis-à-vis its competitors across key success factors.

Stuck in the middle

Strategic position that is not clearly defined, leading to inferior performance results.

Value curve

Horizontal connection of points of each value on the strategy canvas that helps diagnose and determine courses of action.

Value innovation

The simultaneous pursuit of differentiation and low cost that creates a leap in value for both the firm and consumers.

Economic value created

value (V) minus cost (C), indicating potential for competitive advantage.(V-C)

Strategic position

A firm’s strategic profile based on value creation and cost within a specific product market.

Higher value creation

Typically requires higher costs, leading to necessary strategic trade-offs by management.

cube-square rule

increasing the surface area (size) of a storage unit or retail facility results in a disproportionate increase in volume (space).