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

• 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. Exploit existing demand.

Blue Ocean Strategy
Create accepted market space. Make the competition irrelevant. 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.

• 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

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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

• 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.

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