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Before We Start…
It is assumed that after going through the earlier session
you are now able to:
 Explain what is Strategy and RCB Model No. 1
 Understand Porter’s Five Forces Model
 Understand BCG Analysis, GE Analysis, SWOT
Analysis, Value Chain and Gap Analysis
 Explain the Strategic Management Process

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Session 3

Global Business Strategy

 Topics to be covered in this session:

 Blue Ocean Strategy

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Session Learning Objectives…

At the end of this session you should be able to:

 Understand Red Ocean, Blue Ocean and their differences

 Explain Blue Ocean – imperatives, implementation,
implementation sequence etc.

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Marketspace – Two Worlds

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What is Red Ocean

 Companies have long engaged in head-to-head
competition in search of sustained, profitable growth.
They have fought for profits, battled over market-
share, and struggled for differentiation (cost or
product).
 Yet in today’s overcrowded industries, competing
head on results in nothing but a bloody red ocean of
rivals fighting over a shrinking profit pool.
 In today’s red oceans, where most industries are
saturated, one companies gain is always at the cost of
another companies loss.
 This paradigm has its origin in military strategy
where it follows that you have to beat an enemy to
win.
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What is Blue Ocean

 Tomorrow’s leading companies will succeed not by
battling in red oceans, but by creating blue oceans
of uncontested market space ripe for growth .
 Such strategic moves are possible through the
pursuit of product differentiation and low cost
simultaneously. It helps in creating powerful leaps
in value for both the firm and its buyers, rendering
rivals obsolete and unleashing new demand.
 Blue Ocean’s have existed in the past; it will exist in
the future as well. It is only the frames of the top
managers that prevents it from seeing it.
 Constant updating of SIC is an indication this
regard.
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Red Ocean Vs. Blue Ocean

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Blue Ocean Strategy - Imperatives

 Prospects in most established market spaces – red
oceans – are shrinking steadily.
 Population shrinkage across a no. of European nations.
 As trade barriers between nations & regions fall,
information imperfections atrophy instantly.
 Niche markets & monopoly havens are continuing to
disappear.
 Demand across developed markets reaching a plateau.
 Technological advances have substantially improved
industrial productivity.
 Accelerated product life-cycles and obsolescence.
 Commoditization of most product – market segments.

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Conceptual Underpinnings
 Blue oceans have existed in the past and will exist in
the future as well.
 History indicates that blue oceans exist in three basic
industries – automobiles (how people get to work) –
computers (what people use at work) – entertainment
(what people do after work).
 They are not necessarily about technology; the
underlying technology was often already in existence.
 Incumbents often create blue oceans within the ambit
of their core business.
 Company & industry are the wrong units of strategic
analysis; managerial moves are.
 It creates entry barriers through first mover
advantages.
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Blue Ocean - Implementation

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Implementation Sequence

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Some glaring examples

In the last century authors Kim and Mauborgne
have documented the creation of more than 150
blue ocean creations across 30 industries –
 Virgin Atlantic: Fractional jet ownership or travel to
space.
 Sony Play Station: Redefining machine-human
interface in entertainment and targeting anew user
base.
 eBay: Online auctioning.
 Southwest Airlines: Pioneering the concept of LCC.
 Citibank – Automated teller machines & credit cards.
 Tata Nano: Manufacturing a full fledged passenger
car at a price of Rs. 1 lac.
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What then is the Handicap?

 Most of the traditional views in strategy having its
origin in (Economic Theory) led to what is called
the – structuralist paradigm.
 According to this view, companies & managers are
largely at the mercy of economic forces, greater
than themselves.
 Off late emerging views in strategy having its
origin in (Organization Theory) led to a paradigm
shift to what is called the – reconstructionist view.
 According to this view managers need not be
constrained to act within the confines of their
industry. All they need to do is change their
managerial frames.
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Before We End…
It is assumed that after going through the earlier session
you are now able to:
 Understand Red Ocean, Blue Ocean and their differences
 Explain Blue Ocean – its imperatives, implementation,
implementation sequence etc.

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 THANK YOU…

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