Sunday, March 6, 2011

Blue Ocean Strategy (Chapter 1) Creating Blue Oceans - Hard Rock Hotel, The House of Dancing Water

This is the first chapter of Blue Ocean Strategy. This book is written by Professor W. Chan Kim and Renee Mauborgne in 2005 from Harvard Business School. They research for around over 20 years and sum up a theory of Blue Ocean. The terms Blue Ocean and Red Ocean are:
Red Ocean Strategy
Blue Ocean Strategy
Compete in exiting market space
Create uncontested market space
Beat the competition
Make the competition irrelevant
Exploit exiting demand
Create and capture new demand
Make the value cost trade off
Break the value cost trade off
Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost.
Align the whole system of a firm’s activities in pursuit of differentiation and low cost.

Professor Kim indicates that the only way to beat the competition is to stop trying to beat the competition. Red oceans represent all the industries in existence today. The products or services in red oceans are reducing profit margin in cutthroat competition. The bleeding price strategy turns the market space into a blood bath. Blue oceans denote all the industries not in existence today. The market space is not exiting before and there is a highly demand creation and opportunity in return of high profitable growth.

In colleges, most of the business schools are teaching the marketing concepts and business strategies on competing in red oceans. After the financial crisis 2008, we find out the traditional business are collapsing. New technology and innovation service and products are growing rapidly. They have a huge tremendous success and high turnover in blue ocean market space. For instance, Google search engine, Facebook social media, eBay online shop, iPhone from apple and AVATAR 3D movie. Those CEOs understand that there are no perpetually successful products and services in the market. The searching method of blue oceans is to following the value innovation. This is the cornerstone of blue ocean strategy. They are focusing on making the competition irrelevant by creating a leap in value for buyers and opening up new uncontested market space. 

Value innovation contains value and innovation. They are value creation and innovation with technology driven. Seeking for adding value and using advance technology, plus cutting the low demand and low profit return procedures. This can provide a reasonable value at a low cost to new customers.

The traditional hotel is selling room service, shopping mall and restaurant service etc. Some of the hotels can provide gambling tables as well. Hard Rock Hotel not only implements a casino for its clients, but also develop a 250 million USD to create and produce “ The House of Dancing Water”. This show is housed in a purpose-build theater designed with many breakthroughs including a stage pool that holds a record-breaking 3.7 million gallons of water, equivalent to 5 Olympic-sized swimming pools. 

This state-of-the-art theater will provide the setting for the birth of an epic love story and spectacular journey through time, showcasing dazzling costumes, special effects, flying motorcycl, kung fu and record breaking acts never seen before in a theater. It is a crossover of musical, dancing, classic acrobatic acts and special effects. The major audience is from Hong Kong and China which would like to spend money in shopping malls, restaurants and casino. Traditional casino would like to perform musical dancing. Ordinary opera house would only perform legendary musical. “The House of Dancing Water” is a uniquely created for City of Dreams by Franco Dragone, the world’s most spectacular show maker whose shows have been seen by over 65 million spectators worldwide. Hard Rock Hotel captures audience from casino and theater. They search a new blue ocean market place in hotel business with greater value to customers at a higher cost.

On the other hand, Hard Rock Hotel implements other tours package with room rate at a reasonable value at a lower cost. They can pursue differentiation and low cost simultaneously. They are not competing with other hotels in Macau in room service sector, restaurants, shopping malls and casino. For the visitors who would like to watch this show, they prefer to join Hard Rock Hotel package rather than the others.

The senior managers should consider launching the new blue ocean strategy can be risky. They should consider the new strategy won’t affect their business activities when both are performing at the same time. Since the normal business program can bring a sustain cash flow for its company. Cost saving is a very important element in the value innovation process. The high level managers should eliminate those unnecessary programs, facilities or manpower. Similarly, while the other hotels room rate is dropping in low season. Hard Rock Hotel should provide low cost tour package for the customers in order to meet the value innovation. 

Water of Love MV by Sammi Cheng

Hard Rock Hotel, City of Dreams, Macau's leading integrated resort

Behind the Scenes of The House of Dancing Water

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