How strategy shapes structure

Group members
Shabbir Ahmad Sharifkhanwi
Mohd Shoaib Qasim
Kaleem Akbar
Rizwan Ahmad
Shahabuddin khan
 Blue Ocean
Strategy
Go where the profits and growth are - and where the competition isn’t

W. Chan Kim & Renée Mauborgne

 INTRODUCTION
• The article is about blue ocean strategy I.e. how strategy shapes
structure.
• It compares two approaches i.e. structuralist & reconstructionists.
• Gives some keys that in which time which approach should be
fruitful.
• Describe the importance of three proposition alignment.
• Describe how Dubai achieve success by the alignment of the
three proposition.
• Compare Napster & Apple by three proposition.
Rizman will continue….
How strategy shapes
structure
There are two approach.

Structuralist approach or red ocean:

According to this approach
environment
shapes the strategy.

Reconstructionists' approach or blue

ocean:
According to this approach strategy
shapes the structure.
Red and Blue Ocean Strategies
Red Ocean Strategy
Compete in existing market
space.
Beat the competition.
Blue Ocean Strategy
Create accepted market space.
Make the competition irrelevant.

Exploit existing demand. Create and capture new

demand.
Align the whole system of a Align the whole system of a
strategic firm's activities with its firm's activities in pursuit of
choice of differentiation or low differentiation and low cost.
cost.
 WHICH ONE IS THE BEST
• For this you need to consider the following
things in mind:
• Environmental attractiveness
• The capabilities and resources
• Organization strategic mind set i.e.
competing or innovating.
Shahab will continue…..
 When to use the structuralist
approach
• When structural conditions of industry are attractive and you
have the resources and capabilities to create a viable
competitive position, the structuralist approach is the best
• when the industry is not so attractive but the company has
the resources and capabilities to beat out the competition the
structuralist approach is the best
• Use structuralist approach when the company has a bias
toward defending current position and reluctant to venture
outside unfamiliar territory and to go for competition
 When to use reconstructionist
approach
• When the condition is unfavorable and they are going
against you what ever your resources and capabilities
might be,reconstructionist approach is the best one
e.g. excess supply, cut throat competition on and low
profit margin
• When the industry is attractive and the existing players
are well entrenched and the organization does not have
the resources and capabilities to go against them then
reconstructionist approach is the best
• Use reconstructionist approach when the organization
has an orientation toward innovation and a willingness
to pursue new opportunities
 Success of the strategy
Success of the strategy depends on the
development and alignment of the three
proposition.
• Value proposition: what the company offers to
buyers.
• Profit proposition: how the company benefits
from that offer
• People proposition: that motivates those working
for or with the company to execute the strategy
Kaleem will continue
Where the two approaches diverge
Structuralist approach:
• Here the alignment of the three strategy
proposition is in pursuit of either
differentiation or low cost each being an
alternative strategic position in an industry
• The strategy will not be successful if the
value in profit proposition are aligned
around differentiation but the people
proposition is targeted at low cost
Reconstuctionist approach
• According to this approach high
performance is achieved when all three
strategy proposition pursue both
differentiation and low cost
Rising importance of the blue
ocean strategy
Driving forces include:
• Technological advances & improved industrial productivity
• extraordinary array of products and services available
• Supply exceeds demand
• Globalization, niche markets and monopolies disappear
• 20th century strategy and management approach declining
Shabbir Ahmad……
 How Dubai reconstruct their
environment by blue ocean strategy
alignment.
alignment
• Dubai align the three proposition around
differentiation and low cost.
• Dubai value proposition:
• Dozens of world class free zones with
unbeatable incentives for the investors.
• For differentiation 100% foreign ownership free
repatriation of capital and profits, no import or re
export duties
 Continued…….
• Zero corporate tax rate for the first 15 to
50 years.
• Expedited registration process companies
get licensed in half hour.
• All documentation in English.
• World class airport and shipping services.
 Dubai Profit proposition
• Lowering their cost structure by running
like a large business enterprise.
• instead of taking personal and corporate
taxes. Govt has invested in infrastructure
shipping and port services ,transport,
tourism, aviation ,real estate development
and telecommunication.
 Continue . . . . . .
• Dubai does not need military, diplomatic
unit or monetary agency due to the
strategic decision to become a part of
UAE.
• Ruler Sheikh Makhtoum said what is good
for business is good for Dubai.
 Example of Nakheel

• One of the world biggest real estate

developer.
• Wholly owned by Dubai.
• It develop half of all residential
construction projects in Emarat over the
last 10 years. which gives profits to govt
from the housing needs of foreign
employees.
 Dubai people proposition

People proposition for citizens.

• they are guaranteed with govt job.
• Extensive state assistance including
medical care, sickness and maternity
benefits, child care, free education
pension, housing and disability benefits.
 People proposition for
expatriates.
• Dubai has a cosmopolitan environment with
more than 1 million people from over 100
countries around the world.
• Relatively cheap housing 1/5 or 1/3 less than
other major commercial centers.
• Gives foreigner the right to own their property.
• Zero income tax rate.