Market Dynamics of Value Innovation

• Blue Ocean Strategy p.282 Long-term Average cost curve.

“Market Dynamics” in “Value Innovation” contrasts favorably with traditional innovation. In innovation, prices are generally set high to suppress supply. Then, as a reward, so to speak, for having achieved innovation, the company tries to gain the upper hand from higher prices during the introduction phase. Only later do they focus on lowering prices and costs to protect market share and prevent imitation.

• Higher prices during the introduction phase
• Large margins during the introductory period

However, in the case of goods such as knowledge and ideas, where economies of scale, learning effects, and increasing returns are expected, quantity, price, and cost are more important than in the past. Under these circumstances, companies would be wise to expand their market size by offering unprecedented value at affordable price levels and attracting a large number of target buyers from the outset.

• Lower prices during the introduction phase
• Small margins in the introductory period
• Increase scale and then increase profit margins.
  • Target Costing
  • What is “Cost Planning (Target Costing)“? | BM Franchise

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