How to design a long term strategy?

1. Blue ocean vs red ocean strategy

2. Essence of strategy is choosing to perform activities differently than rivals do

1. What is strategy?
2. How are business models connected to strategy?
3. What do you still not understand about strategy?

1. Strategy is a general plan to achieve one or more long-term or overall goals under conditions of
uncertainty. From what we have been able to identify is the fact that there are two kinds of strategy-
Red Ocean Strategy and Blue Ocean Strategy as discussed In the last class. Red Ocean strategy is
when the new entrant competes in existing market space, beat the competition, exploit existing
demand, make the value-cost tradeoff and align the whole system of a firm’s activities with its strategic
choice of differentiation or low cost. Blue Ocean Strategy is when the organization creates
uncontested market space, make the competition irrelevant, create and capture new demand, break
the value-cost trade-off and aligns the whole system of a firm’s activities in pursuit of differentiation and
low cost. These are the basic two types that most organizations follow.
Strategy rests on the unique activities that is the strategy of the organization is able to bloom when the
organization positions itself as it is able to perform differently than rivals do. Strategic positions can be
based on customer’s needs, customer’s accessibility or the variety based positioning. This has been
seen in the case of ice filli, cedar and other multiple cases.

2. Business models use different elements to ensure the strategy that they plan on following is the
perfect fit. The strategy helps them to place themselves strategically as it requires them to make trade-
offs and able to gain competitive and sustainable edge over the competition. This can be very clearly
understood by the resource based view which has recognized multiple tests to ensure the business
models are able to identify effective strategy for themselves.
Elective freedom is not there under the resource-based framework. You have to base your strategy to
the resources you have. You have to decide the competency you should build your strategy on.
Criteria for the strategy for the business models is:
 The test of inevitability – that the resource is hard to copy – sources of physical uniqueness.
The more unique, the better the strategy.
 Path dependency – you have followed a path that is very difficult, and others cannot take the
same path. Unique brand positioning is very hard to copy for someone. E.g in the case of
cedar they positioned their model in a certain way to cater to a specific target market.
 Sources that are causally ambiguous – they do not know how these sources were obtained.
For example, in the case of Trader Joes, the kept the secrecy of their suppliers.
 Economic deterrents – things in which others cannot invest like you do. For example, putting
up a plant that gives the benefits to everyone makes others not to invest in them. Ice filli, for
instance, used organic products and had excess to specific ingredients. This put them at an
incumbency advantage that new entrants were not able to take hold of.
 The test of appropriability – you create a pie of value but not getting most of the pie and it is
taken by the suppliers and distributors. So, develop a competency that you get most of the
value. For example Innocent drinks owners were able to make sure 80% of the profit is theirs.
 The timing of the resource is also important – test of durability – that how long your unique
resource can last. This element of the strategy has been taken up by many models. All the
cases whether it were porter airlines, innocent drinks, ice-filli, etc.
  The test of substitutability – the unique resource cannot be substituted. Is there another way
of achieving the same goal? In the hope of achieving some of them eliminated the competition
or some positioned better.
 The test of competitive superiority – is your resource greater than everyone else ?

1. Strategy is a general plan to achieve one or more long-term or overall goals under conditions of
uncertainty. From what we have been able to identify is the fact that there are two kinds of strategy- Red Ocean
Strategy and Blue Ocean Strategy as discussed In the last class. Red Ocean strategy is when the new entrant
competes in existing market space, beat the competition, exploit existing demand, make the value-cost tradeoff
and align the whole system of a firm’s activities with its strategic choice of differentiation or low cost. Blue
Ocean Strategy is when the organization creates uncontested market space, make the competition irrelevant,
create and capture new demand, break the value-cost trade-off and aligns the whole system of a firm’s
activities in pursuit of differentiation and low cost. These are the basic two types that most organizations follow.

Strategy rests on the unique activities that is the strategy of the organization is able to bloom when the
organization positions itself as it is able to perform differently than rivals do. Strategic positions can be based
on customer’s needs, customer’s accessibility or the variety based positioning. This has been seen in the case
of ice filli, cedar and other multiple cases.

2. Business models use different elements to ensure the strategy that they plan on following is the
perfect fit. The strategy helps them to place themselves strategically as it requires them to make trade-offs and
able to gain competitive and sustainable edge over the competition. This can be very clearly understood by the
resource based view which has recognized multiple tests to ensure the business models are able to identify
effective strategy for themselves.

Elective freedom is not there under the resource-based framework. You have to base your strategy to the
resources you have. You have to decide the competency you should build your strategy on.

Criteria for the strategy for the business models is:

• The test of inevitability – that the resource is hard to copy – sources of physical uniqueness. The more
unique, the better the strategy.

• Path dependency – you have followed a path that is very difficult, and others cannot take the same
path. Unique brand positioning is very hard to copy for someone. E.g in the case of cedar they positioned their
model in a certain way to cater to a specific target market.

• Sources that are causally ambiguous – they do not know how these sources were obtained. For
example, in the case of Trader Joes, the kept the secrecy of their suppliers.

• Economic deterrents – things in which others cannot invest like you do. For example, putting up a
plant that gives the benefits to everyone makes others not to invest in them. Ice filli, for instance, used organic
products and had excess to specific ingredients. This put them at an incumbency advantage that new entrants
were not able to take hold of.

• The test of appropriability – you create a pie of value but not getting most of the pie and it is taken by
the suppliers and distributors. So, develop a competency that you get most of the value. For example Innocent
drinks owners were able to make sure 80% of the profit is theirs.

• The timing of the resource is also important – test of durability – that how long your unique resource
can last. This element of the strategy has been taken up by many models. All the cases whether it were porter
airlines, innocent drinks, ice-filli, etc.
• The test of substitutability – the unique resource cannot be substituted. Is there another way of
achieving the same goal? In the hope of achieving some of them eliminated the competition or some positioned
better.

• The test of competitive superiority – is your resource greater than everyone else.

3. What confuses me is the fact that whether the guidelines and strategy defined by porter should be
implemented or rbv. Because some of the points are head on and do not overlap. Porter is flexible and rbv is
static. You do not see the constraints in porter, while you see them in RBV. If it was that easy to checklist these
all elements, then everyone would have had the perfect business model so what wrong is being done?

How is the strategy not able to ensure successful business models.