By W Chan Kim and Renee Mauborgne. Competing in overcrowded industries is no way to sustain high performance. The real opportunity is to create blue.

Blue Ocean Strategy By W Chan Kim and Renee Mauborgne

Competing in overcrowded industries is no way to sustain high performance.

The real opportunity is to create blue oceans of uncontested market space.

Blue Ocean

Blue and Red oceans Blue ocean characteristics Profit and growth consequences Why blue ocean is so important for future

companies

Blue Ocean

Examples Check cirque du Soleil.Two types of oceans:- Red ocean.- Blue ocean.

Blue Ocean

Ways to create blue ocean:1- explore completely new industries, as eBay

did with the online auction industry.

2- from within a red ocean when a company alters the boundaries of an existing industry- the example of Cirque du.

Blue Ocean

Blue and Red OceansBlue ocean is the engine of growth. What is The problem with red ocean?1- commoditization of products2- price wars3- declining profit margins 4- differentiating your brands becomes

harder both in economic upturns and in downturns.

Blue Ocean

The paradox of strategy-Line extensions 86%- product development- Creating new markets only 14%.- The 86% account for 62% of total revenues

– 39% of total profit.- The 14% in new markets delivered 38% of

the total revenues and 61% of total profits.

Blue Ocean

Red ocean is about finding an enemy and make a fight and win the war against your enemy.

Blue ocean is about doing business where there is no competitor.

The rhetoric about competitive advantage is gone.

Blue Ocean

Blue ocean is not about technology innovation.

Incumbents often create blue oceans. Company and industry are the wrong unit of

analysis

Toward Blue ocean strategy

So what is the most appropriate unit of analysis for explaining the creation of blue oceans?

Its the strategic move. What is strategic move means? It is the set of managerial actions and

decisions involved in making a major market creating business offering- PC servers by Compaq. Google Earth.

Facebook.

Blue Ocean

Creating blue oceans builds brands- brand equity that lasts. Ford, IBM, Apple, Al Marai, STC.

So strategy is the secret.

Blue Ocean

Never use competition as a benchmark No trade-off between price and value. Fun

and art of circus – fun of the circus and art of the theatre.

The case study here is Cirque Du Soliel and Ford and may be other examples.

Their strategic move, cost, value and blue ocean.

The defining characteristics

The reconstructionist view versus structuralist or the environmental determinism

Blue Ocean

Aljazeera Vs Al-Arabia southwest airlines. Fatafeet.

The whole system approach is difficult. What makes an innovation fails and what

makes an innovation succeeds? 2% succeeds Where do you think the word strategy is

coming from? It is from military- Fixed piece of land- enemy-

Barriers to initiation

Fixed demand- fighting for a piece of the demand-

And you try to fight for a bigger piece and that is why you find yourself swimming in a blue ocean.

Zero sum game- one is winning and the other is losing.

Your mind will start from the total demand, competitors, market share, fighting. No creativity and no innovation.

You get bigger piece and someone else will get less- what colour is this.

For Strategic growth you need to look for blue ocean. Because there is fighting over the growth in red ocean.

http://www.youtube.com/watch?v=zrGOBdVm-KE

Strategic logic Challenge the industry assumptions Counter trend Outside the box Outside the market That is not the way to do it- inside the

market

Options to think of their value to the buyer or their cost to the seller –so it is about thinking and innovating in the process of reducing cost structure simultaneously with value maximization for the customer. It is a process of evaluation and deep thinking about it

Eliminate Reduce Raise Create

Nintendo has gone outside the market to appeal to mothers, elderly and adult- based on why?????

Think of service station?Suppose you want to maintain your car.

Value proposition-for the buyer Profit proposition- People structure- what motivates people to

make it a success.

For value innovation

Increase the size of the market Focus on non-customers- who are they Different and low cost De-segment the market – shared needs.