BLUE OCEAN

STRATEGY
A case by W. Chan Kim and Renée Mauborgne

Presented by Reshmi Mahesh Kumar in collaboration

with Sriaa Gupta and Soumya Shukla
 THE OCEANS OF BUSINESS UNIVERSE

● Red ocean companies try to ● Blue ocean companies tap into

outperform rivals to grab bigger uncontested market spaces where
slices of existing demands the competition is irrelevant

● As the place gets increasingly ● In blue oceans, the companies

crowded profit and growth prospect invent and capture new demand
shrink and offer customers a leap in value
while also streamlining its cost
● Products become commoditized
● This results in handsome profits,
● Ever-more-competition turns the
speedy growth and brand equity
water bloody
that lasts for decades
 HOW TO BEGIN BLUE OCEANS?
● It’s not about technology innovation

● You don’t have to venture out into distant waters to

create blue oceans
Counterintuitive
Logic

● Companies can give rise to

completely new industries

● It is created from within a red

ocean when a company alters ● Never use the competition as a benchmark
the boundaries of an existing
industry ● Reduce your costs while also offering customers
more value
CIRQUE DU SOLEIL - “WE REINVENT THE CIRCUS”

● Cirque du Soleil blurred the line between circus and

theatre

● Cirque made the acts more artistic and sophisticated

attracting a whole new group of customers

● The customers had to pay a premium ticket price if they

opt for theatre or opera

● Cirque also eliminated many elements from the circus

like costly animal acts and star performances

● Cirque invented a new and profitable market space

without making the typical trade-off between value and “Blue ocean Strategy is achieved only when the
cost. whole system of a company’s utility, price and
cost activities is properly aligned”
THE PARADOX OF STRATEGY
 UNDERSTANDING THE PARADOX
03
Blue ocean strategy on the
contrary, is about doing
business when there is no
competitor. It creates new land
rather than dividing the existing
01 02
Focus on competitive advantage,
ignored two very important aspects
of strategy:
● To find and develop markets where
there is little or no competition - blue
oceans

● To exploit and protect blue oceans

The pie charts show an With the rise of japanese

imbalance in the red oceans -
most of the corporate strategy is
highly influenced by its roots in
military strategy. It is about
confronting an opponent and
driving him off the battlefield
companies, competition
emerged as the core strategy
of corporate success and
failure. The term best suited is,
competitive advantage
UNDERSTANDING BLUE OCEAN CREATIONS

“ In blue oceans, demand is

created rather than fought over.
There is ample opportunity for
growth that is both profitable and
rapid.”
EARLY BLUE OCEAN CREATIONS

FORD MODEL T CHRYSLER MINIVAN NICKELODEON

BLUE AND RED OCEANS

● Compete in existing market ● Create uncontested market

space space

● Beat the competition ● Make the competition irrelevant

● Exploit existing demand ● Create and capture new demand

● Make the value/cost trade-off ● Break the value/cost trade-off

● Align the whole system of a ● Align the whole system of a

company’s activities with its company’s in pursuit of
strategic choice of differentiation and low cost
differentiation or low cost
SIMULTANEOUS PURSUIT OF DIFFERENTIATION
AND LOW COST

A blue ocean is created in the region where a

company’s actions favourably affect both its cost
structure and its value proposition to buyers. Cost
savings are made from eliminating and reducing the
factors an industry competes on. Buyer value is
lifted by raising and creating elements the industry
has never offered. Over time, costs are reduced
further as scale economies kick in, due to the high
sales volumes that superior value generates
THE CONTRARY
The red ocean assumes that
industry structural conditions are
a given and firms are forced to
compete within them.
Structuralist
According to this view,
companies and managers are
largely at the mercy of economic
forces greater than themselves

Blue oceans are based on a

worldview in which market
boundaries and industries can Reconstructionist
be reconstructed by the actions
and beliefs of industry players
BARRIERS TO IMITATION
The companies that create blue oceans yield long term benefits without any credible
challenges because this strategy creates considerable economic and cognitive
barriers.

Blue ocean creators immediately attract customers in large volumes,

generate scale economies very rapidly, putting imitators at and immediate
and continuing cost disadvantage

The immediate attraction of large numbers of customers can

create network externalities.

It is challenging to imitate blue ocean creators because-

● Imitating a whole system approach is not easy
● Can conflict with the imitator’s existing brand image
A CONSISTENT PATTERN
The scales in the
field should be
Consciously or even with a
unconsciously balance of efforts
Blue Ocean across both
Strategy has oceans
always existed

Although blue ocean strategists have

always existed, their strategies have
been largely unconscious; once
Blue oceans and red oceans
organizations realize that strategies for
have always co-existed and
creating and capturing blue oceans have
always will. Therefore,
underlying logic from the red ocean
practical reality demands that
strategies, they will be able to create
companies understand the
many more blue oceans in the future
strategic logic of both types of
oceans
INDIAN EXAMPLES OF BLUE OCEAN CREATIONS