Introduction to Blue Ocean Strategy

Presents eBay's rationale for its $2.6 billion acquisition in late 2005 of Skype, a fast growing voice-over-Internet protocol (VoIP) provider. Describes Skype's history, technology, business model, and competition, as well as government regulation of VoIP services.

At EMBA PRO, we provide corporate level professional Marketing Mix and Marketing Strategy solutions. Skype case study is a Harvard Business School (HBR) case study written by Thomas R. Eisenmann, Peter A. Coles. The Skype (referred as “Voip Skype” from here on) case study provides evaluation & decision scenario in field of Technology & Operations. It also touches upon business topics such as - Marketing Mix, Product, Price, Place, Promotion, 4P, Economics, Entrepreneurship, Internet, Mergers & acquisitions, Networking, Regulation.

Our immersive learning methodology from – case study discussions to simulations tools help MBA and EMBA professionals to - gain new insight, deepen their knowledge of the Technology & Operations field, company, context, collaborators, competitors, customers, Marketing Mix factors, Products related decisions, pricing strategies and more.

EMBA Pro Explainer - As a strategy concept Blue Ocean strategy was first introduced by W.Chan Kim and Renee Mauborgne, INSEAD Business School professors, in their book - "Blue Ocean Strategy - How to Create Uncontested Market Space & Make Competition Irrelevant"

It is called Blue Ocean Strategy (BOS) because it provides managers a toolbox to create, identify uncontested market space instead of competing in the prevalent market with cut throat competition and decreasing margins.  BOS makes competitors irrelevant & creates new consumer value propositions.

The cornerstone of Blue Ocean Strategy is - "Value Innovation". Value Innovation places equal emphasis on both Value and Innovation. Voip Skype needs to not only redefine the value proposition it is providing to existing customers (clients) but also needs to create new value proposition for target segments (customers) that at present are not Voip Skype's clients. Value innovation can open up new uncontested market space for Voip Skype.

Buyer Utility - It underlines the core values, features or utility Voip Skype's products or services deliver to the buyer. The benefits can be both perceived and real.

Price - In traditional scenarios competitors compete in the Technology & Operations following traditional approach of pricing - ‘Offer customer more for less’. This can provide serious challenge to company’s bottomline (profitability).

Cost - Managers at Voip Skype can use value innovation to overcome limitations suggested by Michael Porter (management guru, strategy guru) in his value cost trade-off as part of competition based strategy. Using Blue Ocean strategy Voip Skype managers can pursue both differentiation and low cost simultaneously.

Adoption - When innovation is pursued in isolation of the value then it can lead to very low level of adoption no matter how significant technological breakthrough is.

In the present business environment , Red Ocean is often defined as a competitive environment where industry boundaries are clearly defined, and existing and new players are trying to out-perform each other using Value-Cost Trade Off. This leads to cut-throat competition and race to the bottom, resulting in lower profitability and higher cost structure as component of total price.

Globalization has also opened doors to suppliers from China, India, Malaysia, Brazil, Taiwan, Turkey, and other emerging economies to compete in the high cost market such as United States & European Union.

Niche markets and local monopolies that company’s like Voip Skype able to exploit are fast disappearing. The organizations in Technology & Operations industry are required to continuously come up with new solutions.

Various product categories in Technology & Operations are becoming more similar, leaving organizations to compete only through pricing strategy.

Accelerated technological innovations and advances are improving industrial productivity, enabling suppliers to manufacture vast array of products and services.

Consumer behavior in the Technology & Operations is also fast evolving because of -market transparency, greater access to information, technological innovations and promotional incentives by competitors)

Growing trend of commoditization of the products and services have also put pressure on companies such asVoip Skype.

Voip Skype can use following Blue Ocean Strategy (BOS) tools and techniques to overcome the red ocean of cut throat competition in Technology & Operations industry.

Which are the factors that Voip Skype can eliminate that players in the industry has long competed on?

Which factors need to be improved well above the industry standards to provide enhanced value to the customers?

Which factors Voip Skype can reduce well below the industry level to structure costs?

Which factors needs to be created by the Voip Skype that had never been offered by competitors in the industry

Voip Skype BOS should have three complementary qualities -- divergence, a compelling tagline, and focus .

The four actions of Voip Skype strategy canvas should be guided toward enforcing these critical qualities. Without these critical qualities, Voip Skype strategy is most likely to be muddled, undifferentiated, and hard to communicate with a significantly high cost structure. The four actions of creating a new value curve should be well guided toward building a company’s strategic profile with these characteristics. These three characteristics serve as an initial litmus test of the commercial viability of blue ocean ideas

Trap 1 - Equating Creative Destruction with Market Creation

Trap 2 - Confusing Technology Innovation with Market-Creating Strategies

Trap 3 - Equating Market-Creating Strategies with Low-Cost Strategies

Trap 4 - Equating Market-Creating Strategies with Differentiation

Trap 5 - Treating Market-Creating Strategies as Niche Strategies

Trap 6 - Making Existing Customers Happier

W. Chan Kim and Renée Mauborgne (2017) Blue Ocean Shift: Beyond Competing - Proven Steps to Inspire Confidence and Seize New Growth, Sep 26, 2017 W. Chan Kim and Renée Mauborgne (2015) Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant, Jan 20, 2015

Thomas R. Eisenmann, Peter A. Coles (2018), "Skype Harvard Business Review Case Study. Published by HBR Publications.

Kotler & Armstrong (2017) "Principles of Marketing Management Management", Published by Pearson Publications.

M. E. Porter, Competitive Strategy(New York: Free Press, 1980)