Marketing management

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.......................................4 IMPLEMENTING BLUE OCEAN STRATEGY........................................................................................................................................... Blue Ocean Strategy 3 ......................................................................................................................................... ..............11 FOUR ACTIONS UNDER BLUE OCEAN STRATEGY...........................................................................................................................6 IMPLEMENTATION ........................8 SIX PATH FRAMEWORK..15 COMPANIES USING BLUE OCEAN STRATEGY. The project also describe about various steps taken to implement this strategy.....................................3 BLUE OCEAN STRATEGY.................................................................................................................14 DEVELOPING A BLUE OCEAN STRATEGY .............................................................................................19 BIBLIOGRAPHY/ WEBLIOGRAPHY................................. ......16 CONCLUSION................................21 OBJECTIVE The objective of our project “Blue Ocean Strategy” is to understand real meaning behind the Blue Ocean and how it is different from the Red Ocean strategy......................................OBJECTIVE...........................

.. it is vast. Products become commodities. industry boundaries are defined and accepted..describe rather than competing within the confines of existing industry or trying to steal customers from rivals (Red Ocean strategy). powerful. deep. In Blue Oceans. demand is created rather than fought over.. In blue oceans.. in contrast. denote all the industries not in existence today—the unknown market space. Red oceans are all the industries in existence today—the known market space. in terms of profitable growth. There is ample opportunity for growth that is both profitable and rapid. Chan Kim BLUE OCEAN STRATEGY The metaphor of Red and Blue oceans describes the market universe. and cutthroat competition turns the red ocean bloody... untainted by competition..... In the red oceans. competition is irrelevant because the rules of the game are waiting to be set. deeper potential of market space that is not yet explored. Thus project also gives us an idea about creating new market space.. ... Like the “blue” ocean... and the competitive rules of the game are known. Blue oceans. Red oceans are all the industries in existence today—the known market space. Here companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded.. Blue Ocean is an analogy to describe the wider. and infinite. 4 . industry boundaries are defined and accepted. prospects for profits and growth are reduced. In the red oceans.. There is ample opportunity for both growth and profit... uncontested market space should be developed that makes competition irrelevant. In blue oceans.. demand is created rather than fought over. and the competitive rules of the game are known. W.

This idea was originally proposed by Prof. In blue oceans. Blue ocean is an analogy to describe the wider. they propose finding value that crosses conventional market segmentation and offering value and lower cost." A core idea is to create a leap in value for both the 5 . demand is created rather than fought over. denote all the industries not in existence today—the unknown market space. service. Products become commodities or niche. The innovation (in product. in contrast. The corner-stone of Blue Ocean Strategy is 'Value Innovation'. Instead. Charles W. In blue oceans. The authors critique Michael Porter's idea that successful businesses are either low-cost providers or niche-players. Hill from Michigan State University in 1988. or delivery) must raise and create value for the market. Prof. Hence. while simultaneously reducing or eliminating features or services that are less valued by the current or future market. Hill proposed that a combination of differentiation and low cost may be necessary for firms to achieve a sustainable competitive advantage. . the term red ocean is used. prospects for profits and growth are reduced. and cutthroat competition turns the red ocean bloody. A blue ocean is created when a company achieves value innovation that creates value simultaneously for both the buyer and the company. untainted by competition. Hill claimed that Porter's model was flawed because differentiation can be a means for firms to achieve low cost. Prof. There is ample opportunity for growth that is both profitable and rapid. deeper potential of market space that is not yet explored. Blue Ocean Strategy is a business strategy that promotes a systematic approach "for making the competition irrelevant.Here companies try to outperform their rivals to grab a greater share of product or service demand. Blue oceans. As the market space gets crowded. competition is irrelevant because the rules of the game are waiting to be set. L.

The difference can be known by the following table:- 6 .company and its buyers by breaking the differentiation/low cost trade-off and to align product value and profit propositions IMPLEMENTING BLUE OCEAN STRATEGY Before implementing Blue ocean strategy it is very important to know the difference between Red and Blue Ocean.

Blue ocean strategists recognize that market boundaries exist only in managers’ minds. extra demand is out the re. largely untapped. Such a strategy therefore allows firms to largely play a non–zero-sum game. This. To them. there is scarcely an attractive or unattractive industry because the level of industry attractiveness can be altered through companies’ conscientious efforts. and they do not let existing market structures limit their thinking. from a focus on competing to a focus on creating innovative value to unlock new demand. By expanding the demand side of the economy new wealth is created. As market structure is changed by breaking the value/cost tradeoff. The crux of the problem is how to create it. in turn. 7 . This is achieved via the simultaneous pursuit of differentiation and low-cost. so are the rules of the game. Competition in the old game is therefore rendered irrelevant. requires a shift of attention from supply to demand. Under blue ocean strategy. with high payoff possibilities.

Stripping away those extras may create a fundamentally simpler. Two well-known examples are Swatch. We have observed two common patterns. can stimulate new demand. other products and services affect their value. lower priced. Look Across Complementary Products and Service Offerings Few products and services are used in a vacuum. they often find new market space. because it affects demand for their business. But they should. Untapped value is often hidden in complementary products and services. Few cinema operators worry about how hard or costly it is for people to get babysitters. which transformed the functionally driven budget watch industry into an emotionally driven fashion statement. and after your product is used. A simple way to do so is to think about what happens before. But in most industries. rivals converge within the bounds of their industry’s product and service offerings. ground transportation is used after the flight but is clearly part of what the customer needs to travel from one place to another. during. lower-cost business model that customers would welcome. functionally oriented industries can often infuse commodity products with new life by adding a dose of emotion and. In most cases. Imagine a movie theater with a babysitting service. Operating and application software are used along with computer hardware. Yet these complementary services are beyond the bounds of the movie theater industry as it has been traditionally defined. transforming the emotionally driven industry of cosmetics into a functional. in so doing. Take movie theaters. The ease and cost of getting a babysitter and parking the car affect the perceived value of going to the movies. Emotionally oriented industries offer many extras that add price without enhancing functionality. In the airline industry. no-nonsense cosmetics house. Conversely. The key is to define the total solution buyers seek when they choose a product or service. 8 . which did the reverse.IMPLEMENTATION Look Across Functional or Emotional Appeal to Buyers When companies are willing to challenge the functional-emotional orientation of their industry. or The Body Shop. Babysitting and parking the car are needed before people can go to the movies.

Needles and syringes also evoked unpleasant feelings of social stigmatism for patients. large versus small customers. launched in 1985. and of administering doses according to his or her needs. needles.Look Across the Chain of Buyers Individual companies in an industry often target different customer segments—for example. [Novo Nordisk] saw that it could break away from the competition and create a blue ocean by shifting the industry’s longstanding focus on doctors to the users—patients themselves. Think of Novo Nordisk. And the clothing industry sells predominantly to users. 9 . And patients did not want to fiddle with syringes and needles outside their homes. the Danish insulin producer that created a blue ocean in the insulin industry…. Look Across Strategic Groups within Industries The key to creating a blue ocean across existing strategic groups is to break out of this narrow tunnel vision by understanding which factors determine customers’ decisions to trade up or down from one group to another. This led Novo Nordisk to the blue ocean opportunity of NovoPen. which was supplied to diabetes patients in vials. Vials left the patient with the complex and unpleasant task of handling syringes. Challenging an industry’s conventional wisdom about which buyer group to target can lead to the discovery of new Blue Ocean. focuses overridingly on influencers: doctors. In focusing on patients. But often it is the result of industry practices that have never been questioned. Novo Nordisk found that insulin. presented significant challenges in administering. and insulin. The pharmaceutical industry. for example. But an industry typically converges on a single buyer group. companies can gain new insights into how to redesign their value curves to focus on a previously overlooked set of buyers. the first user-friendly insulin delivery solution. Sometimes there is a strong economic rationale for this focus. a frequent occurrence because many patients must inject insulin several times a day. NovoPen. By looking across buyer groups. The office equipment industry focuses heavily on purchasers: corporate purchasing departments. was designed to remove the hassle and embarrassment of administering insulin.

today NetJets is a 10 . Consider NetJets. acquiring more than two million members in more than six thousand locations. buyers implicitly weigh alternatives. A new Curves opens. with total revenues exceeding the US$ 1 billion mark. Since franchising began in 1995. and consumer rating reports reinforce the vertical walls between one industry and another. or enjoy reading a favorite book at a local café? The thought process is intuitive for individual consumers and industrial buyers alike. Curves built on the decisive advantages of two strategic groups in the U. even a new ad campaign can elicit a tremendous response from rivals within an industry. however. Yet. but the same actions in an alternative industry usually go unnoticed. however.S. Curves has grown like wildfire. at its inception. unlocking a huge untapped market. trade shows. For some reason. operating more than two hundred fifty thousand flights to more than one hundred forty countries. fitness industry. and making its offering significantly blander than the competition’s. Do you need a self-indulgent two hours? What should you do to achieve it? Do you go to movie. Purchased by Berkshire Hathaway in 1998. In less than twenty years NetJets has grown larger than many airlines. the space between alternative industries provides opportunities for value innovation. A shift in price. have a massage. Curves was seen as entering an oversaturated market. every four hours somewhere in the world. Trade journals. which created the blue ocean of fractional jet ownership. Look Across Alternative Industries In making every purchase decision. on average.S. gearing its offering to customers who would not want it. Curves exploded demand in the U. a change in model. we often abandon this intuitive thinking when we become sellers. often unconsciously.Consider Curves. this growth was triggered almost entirely through word of mouth and buddy referrals. Rarely do sellers think consciously about how their customers make trade-offs across alternative industries. In reality. What’s more. a veritable blue ocean of women struggling and failing to keep in shape through sound fitness. with more than five hundred aircraft. the Texas-based women’s fitness company. fitness industry— traditional health clubs and home exercise programs—and eliminated or reduced everything else. Often.

multibillion-dollar business. NetJets’ success has been attributed to its flexibility. increased reliability. hassle free travel experience. and strategic pricing. The reality is that NetJets reconstructed market boundaries to create this blue ocean by looking across alternative industries. with revenues growing at 30–35 percent per year from 1993 to 2000. shortened travel time. SIX PATH FRAMEWORK 11 .

These approaches are called the six paths framework. These paths have general applicability across industry sectors. and they lead companies into the corridor of commercially viable blue ocean 12 .The six convectional boundaries of competition Industry Strategic group Buyer group From Competing within Scope of product and service offering Functional – emotional orientation of an industry To Creating across time There are six basic approaches to remaking market boundaries.

and strive to stand out in the strategic group they play in • Focus on the same buyer group. All are based on looking at familiar data from a new perspective. on which most companies hypnotically build their strategies. economy cars. These paths challenge the six fundamental assumptions underlying many companies’ strategies. These six assumptions. Specifically. or the influencer (as in the pharmaceutical industry) • • • Define the scope of the products and services offered by their industry similarly Accept their industry’s functional or emotional orientation Focus on the same point in time—and often on current competitive threats—in formulating strategy 13 . keep companies trapped competing in red oceans. None of these paths requires special vision or foresight about the future. and family vehicles). companies tend to do the following: • • Define their industry similarly and focus on being the best within it Look at their industries through the lens of generally accepted strategic groups (such as luxury automobiles. the user (as in the clothing industry). be it the purchaser (as in the office equipment industry).ideas.

The company should identify which factors should be raised above industry’s standard 14 . A NEW VALUE CURVE The company should create factors that have never been offered.FOUR ACTIONS UNDER BLUE OCEAN STRATEGY The company should identify which factors should be reduced well below the industry’s standard The factors the company takes for granted should be eliminated.

Ultimately. Capitalize on existing demand but ensure you leave no stone unturned in exploring ways to create new customers. we need to be the leader in driving down the industry cost. Who should be your next customer? Who will be your customers in three to five years time? What do you need to do to make them customers? Challenging the Industry Cost The industry we operate in has a degree of over capitalizations that is not adding value and is simply not needed by your customers. You need to identify these areas and eliminate them from your value proposition. 15 . Challenge the performance of your existing services.DEVELOPING A BLUE OCEAN STRATEGY Creating New Market Space If we do operate in an existing market that is highly competitive (red ocean). Whether that is in product. Challenge yourself. then that is not necessary a bad thing but we believe it is vital to eliminate potential risk (competing in a Red Ocean) and begin to identify how we can create uncontested market space(blue ocean)and make the competition irrelevant. Too many organizations become complacent and fail to innovate themselves. products and delivery systems. service or delivery systems. Identifying Non-Customers There are customers out there who are not showing up on our radar screen. Thinking Beyond Existing Boundaries Consider being unconventional during our strategic planning process.

Last year there were 2. the first company leader who was not from within the company.e. are relatively small in comparison to those of established companies. Finland’s and Nokia’s largest market. CJ-GLS: CJ-GLS is a latecomer in the logistics industry. and no product is introduced to the market without first getting a Value Innovation Certificate. collapsed overnight.COMPANIES USING BLUE OCEAN STRATEGY Samsung: Value Innovation is Samsung’s core tool for product development and played a significant role in helping Samsung become the world’s top consumer electronics company. In 2003 the Digital Media unit launched 40 new products using the VI process. which was just a small. At the time the company’s core activities were paper and rubber products. But. and its resources. it has achieved a distinct competitive advantage through innovative information technology (i. In 1993 Lou Gerstner became CEO. IBM: Between 1991 and 1993 IBM recorded losses of USD 16 Billion and the future was looking grim to say the least. so that by 2001 $35 Billion of $86 Billion total sales were from the newly created Global Services. By 1994 Nokia was selling off its industrial divisions and was listed on NYSE as the world’s premier supplier of mobile phones. This radical shift in company culture and orientation is widely accredited with IBM’s exemplary recovery to growth and healthy profitability. such as the number of trucks and warehouses. He completely re-oriented the company’s focus from technology driven to customer solution driven. RFID—radio frequency identification). which 16 . and its first quarter profits were 50 times higher than that of the same period the previous year.. in fact not even from within the industry. Nokia: In 1991 trade with the Soviet Union.000 employees working in cross-functional teams on 90 Value Innovation projects at Samsung. peripheral division three years earlier.

Apple: Apple computers invented a new market with the iPOD digital music player. It’s flashy. ubiquitous-oriented 3PL system. it sold in the first nine weeks what it had planned to sell over six months.. Because the Duet had features never seen before: It could wash big loads yet used very little water and electricity.has enabled it to create an uncontested market space. vs. priced at a hefty US$ 749. Apple has sold more than 10 million music players. Stokke: Norwegian furniture company Stokke entitled 'Hotweels' from Fast Company (May 2005). It could also handle silks. it inspired real affection among women. lace. One remarkable fact about CJ-GLS is that its swift growth comes not from attracting competitors’ customers from the existing Red Ocean market but from creating a Blue Ocean market (3PL market). which previously existing incumbents ignored. and enabling the stroller to navigate any terrain. They said that it changed their lives because it saves them time and gave back some of their freedom. adding $6. and cleaned better. The company’s idea was to create a portable music player so people could listen to it anywhere. to face either forward or backward.300. and also from constructing a new business model founded on a RFID-based. US$ 600 a pair for most existing models. Because it offers a package of unprecedented attributes: It’s flexible design makes life easier for parents by allowing the seat to be raised to eye-level. Whirlpool: Whirlpool’s front-loading washer-dryer combo called the Duet. When Stokke introduced the Xplory baby stroller in the U. But best of all. which the company introduced to a well-saturated market in 2001. electronic logistics business. yet it became a sensation. this case study provides valuable information on how a company reinforces its competitive advantage from the Red Ocean while it transitions into a Blue Ocean by utilizing advanced information communication technologies. The Duet was tagged at US$ 2.S. doing laundry in record time. Analyzed through a Four Actions Framework and characterized as Blue Ocean.2 billion to the company’s revenue. and comforters. futuristic form creates a strong emotional bond. 17 .

personal portable stereos). 18 . The reality is that NetJets reconstructed market boundaries to create this blue ocean by looking across alternative industries. and strategic pricing. NetJets’ success has been attributed to its flexibility. Purchased by Berkshire Hathaway in 1998. Other companies using Blue Ocean Strategy are: • • • • • • Cirque du Soleil (the circus reinvented for the entertainment market). Starbucks (coffee as low-cost luxury for high-end consumers). today NetJets is a multibillion-dollar business. In less than twenty years NetJets has grown larger than many airlines. with revenues growing at 30–35 percent per year from 1993 to 2000. Sony (the Walkman . operating more than two hundred fifty thousand flights to more than one hundred forty countries. with more than five hundred aircraft. Cars: Japanese fuel-efficient autos (mid-70s) and Chrysler minivan Dell (mid-1990s). shortened travel time. hassle free travel experience. EBay (online auctioning).Netjets: NetJets. which created the blue ocean of fractional jet ownership. increased reliability.

• • BLUE OCEAN STRATEGY seeks to make the creation and capturing oceans as systematic and actionable as competing in the red waters of known market space. success examples and the so-called ‘Value Innovation’ framework. visual methodology that allows companies to challenge industry boundaries and taken for granted assumptions and in the process discover highly distinctive and successful strategies. For 19 . An innovation-focused and duly motivated organization. companies make their competition irrelevant and discover unoccupied market space (hence the shift from a bloody. Significant decrease in development and operational costs. from idea formation to market introduction. and provides the strategy formation framework.CONCLUSION Blue Ocean Strategy is a portfolio of inter-related concepts and methodology allowing companies to breakaway from head-on competition in order to create and maintain uncontested market spaces of high customer value. Blue Ocean Strategy is the most influential new concept in management strategy. The strategy outlines the premise. Organizational Change and Staff Motivation. whose exciting premise is that companies can rearrange conventional factors of competition in order to create a leap in customer value. Value Innovation sets the stage for the rest of the Blue Ocean Strategy concepts. Value Innovation is the first component of BOS. Significant increase in speed to market. research. confined red sea to an expansive blue ocean). In the process. Value Innovation is a highly pragmatic. customer-based innovations. which allows companies to create Blue Ocean Strategies and in the process achieve: • • High-impact. The portfolio includes the whole leadership gamut from Strategy Formation. Strategy Implementation.

This focus on beating the competition in existing market space was exasperated by the meteoric rise of the Japanese in the 1970s and 1980s. for virtually the first time incorporate history. but also providing the analytical frameworks and tools to act on this insight. therefore. Blue and red oceans have always coexisted. from analyzing the underlying economic structure of an existing industry. competing in red oceans dominates the field of strategy in theory and in practice.although blue ocean strategists have always existed. the center of strategic thinking gravitated further towards the competition. costs are reduced further as scale economies kick in. due to the high sales volumes that superior value generates. and that competition determines the appropriateness of a firm’s activities that can contribute to its performance. however. Faced with mounting competition in the global marketplace as. Buyer value is lifted by raising and creating elements the industry has never offered. The result has been a fairly good understanding of how to compete skillfully in red waters. to benchmarking the competition. to choosing a strategic position of low cost or differentiation or focus. for the most part their strategies have been largely unconscious. Over time. Blue ocean strategy seeks to remedy this by not only decoding the pattern and principles behind the successful creation of blue oceans. 20 . Part of the reason traces back to the historical foundation of business strategy—war—where territory is defined and limited and opponents compete to protect and enlarge their share of limited and existing terrain. A blue ocean is created in the region where a company's actions favorably affect both its cost structure and it value proposition to buyers. At present. Practical reality. little practical guidance exists to create and capture them. A slew of competitionbased strategies emerged which argued that competition is at the core of the success and failure of firms. customers were deserting Western companies in droves. although some discussions around blue oceans exist. demands that companies understand the strategic logic of both types of oceans. Yet. Cost savings are made from eliminating and reducing the factors an industry competes on.

feedblitz. www. “Creating Blue Oceans” 26 november2006. 2006. “Blue Ocean strategy” 4 “A Conversation with W. WEBLIOGRAPHY • • • • • • • • • www.gamasutra. “TECH TALK: Blue Ocean Strategy” May 1. Chan Kim and Renee Mauborgne authors of BLUE OCEAN STRATEGY” 21 . 2006. “Nintendo’s Kaplan Discusses 'Blue Ocean' Strategy” February 9. “How we can develop a Blue Ocean Strategy for your organization” www. Blue Ocean strategy by W Chan Kim and Renee Mourbogne Harward Business Review.emergic.blueoceanstrategy. “A strategy for third-party logistics systems: A case analysis using the blue ocean strategy” 24 May 2007. www. www.12manage.wikipedia.

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