This assignment describes the Blue Ocean Strategy as an innovation concept within the corporate strategic management on the example of IKEA. This is to be done by analysing the framework and the tools of the Blue Ocean Strategy by considering both basic principles and practical implementation.
The Blue Ocean Strategy aspires to turn strategic management on its head by putting “value innovation” in front of “competitive advantage” as the basically goal to create consumer demand and exploit untapped markets. When IKEA entered the market in the late 1950s they focused on the important factors that buyer value and make them to co-producers by implementing unique do-it-yourself mentality. Therefor IKEA combined differentiation with a cost leadership and created a blue ocean helping the founder Ingvar Kamprad to become one of the wealthiest people in the world. As the current business world continues moving towards a faster, more global environment in which there are more and more competitors trying to grab a piece of the pie, the need to develop blue oceans has never been greater.
Table of Contents
1 Introduction
1.1 Problem Definition
1.2 Objectives
1.3 Methodology
2 Strategy
2.1 Aims and Characteristics
2.2 Corporate and Business Strategy
2.2.1 Marked-based View
2.2.2 Resource-based View
3 Blue Ocean Strategy
3.1 Basic Approach
3.1.1 Accruement
3.1.2 Red and Blue Oceans
3.1.3 Value Innovation
3.2 Analytical Tools and Frameworks
3.2.1 Strategy Canvas
3.2.2 Four Actions Framework
3.2.3 Three Characteristics of a Good Strategy
3.3 Six Path Framework to find Blue Oceans
4 IKEA and BOS
4.1 Facts and Figures
4.2 Business Model
4.3 Market Overview
4.4 IKEA’s Blue Ocean Strategy
4.4.1 Strategy Canvas
4.4.2 ERRC Grid
5 Critical Analysis
5.1 Sustainability
5.2 BOS versus Marked-based View
5.3 BOS versus Resource-based View
5.4 Limitations of the BOS
6 Conclusion
Objectives and Topics
This paper examines the Blue Ocean Strategy (BOS) as an innovation framework for strategic management, utilizing IKEA as a practical case study to demonstrate how value innovation can break market trade-offs.
- Theoretical foundations of corporate and business strategy, including market-based and resource-based views.
- Core concepts of Blue Ocean Strategy, such as red vs. blue oceans and value innovation.
- Analytical tools of BOS including the Strategy Canvas, Four Actions Framework, and Six Path Framework.
- Practical implementation of BOS by IKEA, focusing on business model innovation, the ERRC grid, and supply chain efficiency.
- Critical evaluation regarding the sustainability of blue ocean advantages and limitations of the strategic approach.
Excerpt from the Book
3.1.3 Value Innovation
Innovations are major drivers of long-term corporate growth and especially different products as well as services creating new potentials. The value innovation is the cornerstone of the BOS and the strategic logic of high growth that was firstly proofed by Kim/Mauborgne in a five-year study in the late 1990s. The value innovation is shown in Figure 2 and created when the company can reduce costs and lift buyer value at the same time. It anchors innovation with buyer value and differs from value creation as well as technology innovation.
Therefor the BOS is a hybrid strategy that pursues differentiation and low cost simultaneously. This is possible by reducing the factors an industry competes on and by raising and creating elements the industry has not offered before. Value innovation furthermore based on a Reconstructionist view due to that market boundaries as well as industry structure could be reconstructed by actions and beliefs of industry players. Due to the fact that many products offering a plurality of functions that customers neither value nor use value innovation has not to be a technical enhancement.
Summary of Chapters
1 Introduction: Provides the problem definition and research objectives, identifying the need for companies to move beyond traditional competitive strategies toward blue oceans.
2 Strategy: Explores the theoretical roots of strategy, distinguishing between corporate and business levels and comparing market-based and resource-based views.
3 Blue Ocean Strategy: Introduces the core concepts and frameworks of BOS, including the distinction between red and blue oceans and the tools used to find new market space.
4 IKEA and BOS: Analyzes the IKEA business model and applies the BOS framework to illustrate how IKEA successfully created its own blue ocean.
5 Critical Analysis: Evaluates the long-term sustainability of blue oceans and contrasts BOS with traditional market-based and resource-based approaches while highlighting potential limitations.
6 Conclusion: Synthesizes the main findings, reiterating that value innovation allows for profitable, rapid growth by making competition irrelevant.
Keywords
Blue Ocean Strategy, Value Innovation, IKEA, Competitive Advantage, Market Boundaries, Strategic Management, ERRC Grid, Strategy Canvas, Cost Leadership, Differentiation, Business Model, Sustainability, Innovation, Market-based View, Resource-based View
Frequently Asked Questions
What is the core focus of this assignment?
The assignment fundamentally describes the Blue Ocean Strategy as a successful innovation concept within corporate strategic management, illustrated through the practical example of IKEA.
What are the primary themes covered in the text?
The key themes include the contrast between market-based and resource-based strategies, the methodology of finding uncontested market space, and the application of BOS tools like the Strategy Canvas and ERRC Grid.
What is the main objective or research question?
The primary goal is to analyze the framework and specific tools of the Blue Ocean Strategy by considering both its basic principles and its practical implementation in a real-world business setting.
Which scientific methodology is employed?
The research is structured through a review of strategic management theory followed by the systematic application of BOS analytical frameworks to the business model and history of IKEA.
What topics are discussed in the main body?
The main body covers the theoretical definition of strategy, the core BOS concepts (Red/Blue oceans), analytical frameworks, a deep dive into IKEA’s business practices, and a critical analysis of BOS sustainability.
What characterizes this work?
The work is characterized by the application of the "value innovation" concept, where a company pursues differentiation and low costs simultaneously to create new demand.
How does IKEA utilize the Four Actions Framework?
IKEA uses the framework to eliminate high-cost materials and design commissions, reduce distribution complexity, raise supply chain sustainability, and create a unique "do-it-yourself" shopping experience.
Why is IKEA considered a "blue ocean" company?
IKEA is considered a blue ocean entity because it shifted market boundaries by offering a unique combination of functionality, quality, and low price through a self-assemble business model that its competitors did not initially replicate.
What are the identified limitations of the Blue Ocean Strategy?
Limitations include the high risk and investment required for new market exploitation, the difficulty of obtaining employee commitment during strategic reorientation, and the threat of competition eroding innovation-led profits over time.
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- Henning Wenzel (Autor:in), Andreas Förster (Autor:in), 2013, Blue Ocean Strategy. How IKEA created a new market, München, GRIN Verlag, https://www.grin.com/document/315511
