Blue ocean strategy

BLUE OCEAN STRATEGY

History and Background

• Book authored by W.Chan Kim and Renee Mauborgne in 2005;

• Studied 150 strategic moves spanning more than 100 years and 30 industries

• Blue Ocean Strategy is the simultaneous pursuit of low cost and differentiation

• Aim is not to outperform the competition but to make it irrelevant

Red Ocean vs. Blue Ocean

Red Ocean

• Compete in existing market space

• Beat the competition• Exploit existing demand• Make the value-cost trade-

off• Align strategy choice of

differentiation or low cost

Blue Ocean

• Create uncontested market space

• Make the competition irrelevant

• Create & capture new demand

• Break the value-cost trade-off

• Simultaneous pursuit of differentiation and low-cost

Three Tiers of Non-CustomersThird Tier : Unexplored non

customers in distant markets

Second Tier : Refusing noncustomers who consciously choose against the market

First Tier : Soon-to-be noncustomers who are

on the edge of the market

Value Innovation

Buyer Value

Cost

Value Innovation

Cost Saving – Eliminate & Reduce Competing Factors

Buyer Value Lifted – Raise & Create New Elements

Strategy Canvas

Graphical Representation of

Strategy+

Big picture View+

Landscape Scanning+

Relative Positioning vs. Competitors

The Four-Action Framework & The ERRC Grid

Eliminate

Raise

Reduce

Create

A

NEW

VALUE

CURVE

Successful Implementation of Blue Ocean Strategy

LG ELECTRONICS

Localization as an initial strategyUnderstand the idiosyncrasies of key local markets by

opening research, manufacturing, and marketing facilities

in those countries.

Some of the localization strategies adopted in India:

Refrigerators with larger vegetable and water-storage

compartments, surge-resistant power supplies

Exteriors: Red color - South Indians and Green color - North

Indians.

Microwaves with dark-colored interiors to hide spices’ stains

Television with a built-in video game for cricket fans and extra-

loud sound to listen music.

Why Blue Ocean Strategy

Tough competition from local and global players

Need for sustenance

Create untapped market space and higher profitable growth.

Target to be in the top 3 in the consumer electronics market

by 2010.

Plans to Double its sales volume and profit by 2010

Focus more on high-end products

Enter new segments of emerging markets like China, India,

Middle-east and Africa and thus creating uncontested market

space.

Blue Ocean in India

Strategy: Improve the product portfolio and Innovative management

processes.

Products targeting health-conscious consumer under the brand name

‘Intello’.

Planning on high-end products like Whisen range of wall-mounted AC’s,

TV Dios refrigerators and X-canvas plasma TVs.

Planned to launch innovative products like Qiblah phone, TV

refrigerators, Swarovski crystal refrigerators and bag-less range of

vacuum cleaners.

Washing Machine

Vacuum cleaner Microwave Refrigerator

Kitchen Appliances

Business group

ERRC Grid for LGE

Re-construct market boundaries (1/2)

Look acros

s Alternative

Industries

•Moving from conventional electronic products to high-end products like big screens LCD and Plasma TVs in collaboration with Philips.

•Expanding its product portfolio by adding vacuum cleaners, MP3 players, DVD payers, DVD recorders, home theatre systems, car & portable audio equipment.

Look across Strate

gic Group

s within Indust

ry

•Group of companies within an industry that pursue a similar strategy.

•Different groups for different products and different markets.

•Group of consumer electronics companies like Sony, Samsung pursuing similar strategy of digitization and innovation for gaining market share.

Look acros

s Chain

of Buyer

s

•Widen the scope of products by concentrating individually on each segment of buyers.

•Home appliance products for housewives, young people for mobile phones and music players, high income groups for LCD TVs and Plasma TVs.

Re-construct market boundaries (2/2)

Look acros

s Competitive products & Servi

ce Offerings

•House-hold item as free gift along with home-appliance products.

•Complementary products like CD, DVDs of popular movies for digital display division products.

•Cookery classes for its micro-wave products

Look acros

s Functional or

Emotional

appeal to

buyers

•Attract customer with emotional advertisments.

•"A Richer, Happier life wherever you are" for home appliance division

•"Thrilling moments with HD DVR built-in Plasma TV" for HD DVR.

•"LG, caring your health in every way" for LGE's Neo Plasma Plus ACs.

Look acros

s Time

• New Trends emerging in the market

• Adopt new and latest technology to capture the markets

Three Tiers of non-customers for LGE

Third Tier:

"Unexplored non-customers".

Very poor people who use limited electronic products.

Second Tier:

"Refusing non-customers".

Can use the products but avoids it due to improper knowledge and

information.

Customers of regular TV could be converted into users of LDC and Plasma TVs with right advertising

and marketing campaigns

First Tier:

"Soon to be non-customers".

These are the customers who used the competitors' products.

Convert them by making them aware about features of LG's products and

services.

Mission of LG: Digital Design that makes Customer’s Dream come True

Analyzing Customer’s

needs

Analyzing Product Value

Concept Creation

Lifestyle creation

Design•Needs•Desire•Dream

Value Innovation

CustomerTechnical Innovation/Efficiency Value/Brand Value/Environmental Value

Entertainment & Enjoyment/Convenience & Efficiency/Communication & Information

Benefits to LG by adopting Blue Ocean Strategy

LG implemented Blue Ocean Strategy from 1st January 2007

for its mobile communication and digital display divisions.

The positive statistics for the first quarter of 2007,

especially for its mobile communication and digital display

division reinforces LGE confidence about its Blue Ocean

Strategy.

Mobile communication division grew by 14.7%.

Revenues increased by 17.8% with sales of 15.8 million of

Chocolate series phones.

Digital Display division including plasma display panels and

flat panel TVs and monitors grew by 1.5%.

Successful Implementation of Blue Ocean Strategy

KAUN BANEGA CROREPATI

KBC – Background

• The challenge - 'a program idea that will have as much viewership as an Indo-Pak cricket match on a Sunday’.

• Adaptation of a successful program in the US, Who Wants To Be A Millionaire.

• Created a new era in TV shows entertainment as a reality TV show by bringing the viewers as participant in the TV shows.

• KBC did leave all the saas-bahu serials behind: – 1. KBC Star Plus 2130-2200 5.6 – 2. KBC Star Plus 2100-2130 4.9 – 3. Kahaani Ghar Ghar Kii Star Plus 2200-2230 4.7 – 4. Kyunki Saas Bhi Kabhi Bahu Thi Star Plus 2230-2300 4.5 – 5. Kasautii Zindagii Kay Star Plus 2030-2100 3.7

What KBC did differently?

The Red Ocean of Saas-Bahu serials

Demand from – Housewives mostly

Repetitive & Monotonous – Similar theme across serials and channels

Passive viewing

Absence of any Mega Star

No knowledge imparted

The Blue Ocean of KBC

Demand from – All sections across age groups

Each episode – fresh, content differentiation

Very Active viewing, audience could act as ‘helpline’…could win prizes…could test their own knowledge

Brought in ‘Amitabh Bachchan’ – huge charisma, mass appeal

Enhanced the General Knowledge/Awareness of audience

KBC - Four Actions Framework

A New Value Curve

Reduce Advertisement

Expenditure

Eliminate The stereotype Family Drama

Raise A Superstar Host

Create Viewer Participation

KBC – The Strategy Canvas

Successful Implementation of Blue Ocean Strategy

INDIAN PREMIER LEAGUE

Cricket before IPL

Test CricketOne-Day

ERCC Grid

A New Value Curve

Reduce Spectator Time

TechniquePredictability

Eliminate Indefiniteness of

Result

Raise Entertainment

Pace of the gameFlexibility in timings

Create Confluence of players

City LoyaltyOpen to Dummies

Three Tiers of non-customers

First Tier

•Working Executives

Second

Tier •Women

Third

Tier •Families

New Strategy Canvas

Spectato

r Tim

e

Class and Tech

nique

Predict

ability

Enterta

inment

Pace of t

he game

Flexibility in

timings

Indefiniteness

of Resu

lt

Confluence of p

layers

City Lo

yalty

Open to Dummies

Test Cricket

One-Day

IPL

Misconceptions

• Blue Ocean Strategy is a customer-oriented strategy

• Blue Ocean Strategy is like an old wine in a new bottle, as it is just a modified version of differentiation strategy

Blue Ocean v/s Differentiation

Differentiation• Choice between

differentiation and cost leadership

• Competes within existing boundaries

Blue Ocean• Blue Ocean Strategy is not

about making a trade-off between differentiation and low cost,

• But about breaking the trade-off between the two

• Looks across conventional boundaries of competition

Blue Ocean v/s Customer Oriented

Customer Oriented• Tend to focus on existing

customers of the company and the industry

• Companies make adjustments and modifications over existing value elements

Blue Ocean• Creates new demand

through exploring the industry’s non-customers

• Discover the paths for reconstructing market boundaries and

Thank You