ARTICLE SUMMARY

WHAT IS STRATEGY
There are five types of strategy

1) Operational effectiveness is not a strategy.

2) Strategy rests on unique activities.
3) A sustainable strategic position requires trade-offs.
4) Fit drives both competitive advantages and sustainability.
5) Rediscovering strategy

Strategy is plan of preparing a continuous action for a business performances. Then coming to
the operational effectiveness is not a strategy, the companies must be flexible to respond rapidly
to competitive and market changes and they must be a continuous to achieve the best practice.
Some true a few competencies in the by Michael E. porter race to stay ahead of the rivals and
changing techniques and technology. According to the new dog-ma, rivals can quickly copy and
market positions, and competitive advantages is, at best, temporary. True, some barriers to
competition are falling as regulation eases and market becomes global. True companies have
properly invested energy in becoming learner and more nimble. The root of the problem is the
failure to distinguish between operational effectiveness and strategy. Total quality management,
benchmarking, time based competition, outsourcing, partnering reengineering, change
management farther away from viable competitive positions.

A company can outperform rivals only if it can establish a difference that it can preserve. It must
value at a lowest cost or do both. Finally all the differences between the companies in cost or
price derive from hundreds of activities such as calling on customers assembling final products,
and training employees and cost is generated by activities and cost advantage arises from
performing particular activities more efficiently than competitors. Differences in operational
effectiveness were at the heart of the Japanese challenges to western companies in the 1980’s the
Japanese were so far ahead of rivals in operational effectiveness at the same time.

The TQM time based competition, and benchmarking, have changed how they perform activities
in order to eliminate inefficiencies, improve customer satisfaction, and achieve best practice. The
popularity of outsourcing and virtual corporation reflect the growing recognition that it is
difficult to perform all activities as productively as specialists. But the resulting major
productivity gains being captured by customers and equipment suppliers, not retained in superior
profitability even in industry to.

The second reason was improved in operational effectiveness is insufficient competitive

convergence is more subtle and insidious and benchmark company’s do, the more they look a
like. The recent wave of industry consolidation through mergers makes sense in the context of
OE competition. The competitors left standing are often those that out lasted others, not
companies with real advantages. After a decade a impressive gains in operational effectiveness
and many company’s facing diminishing returns and continuous improvement has been etched
on managers brains. Gradually the managers have let operational effectiveness supplant strategy.

The strategy rests on unique activities is the essences of strategy is choosing to perform the
activities to differentiate than rivals do suppose the Ikea, the global furniture retailer based in
Sweden, also has a clear strategic positioning. Ikea targets gets young furniture buyers who want
style at low cost. One area might contain 25 sofas. In contrast, ikea serves customer who are
happy to trade off service for cost. Instead of having a sales associate trail customer around the
store because of the work for a living, have a need to shop at odd hours. The origin of strategic
positions are emerge from three distinct sources, which are not mutually exclusive and often
overlap. Then finding the new position of strategic positions can be based on customer’s needs,
customer’s accessibility, or the variety of a company’s products or services can repair or
maintenances services. In private banking the for example Bessemer trust company targets
families with a minimum of $5 million in a investable assets who want capital preservation
combined with a wealth accumulation. Despite the most generous compensation of account
officers and the highest personnel cost as a percentage of operating expenses, Bessemer
differentiation with its target families produce a return on equity estimated to be the highest of
any private banking competitor.

Citibank provides a $250000 with in a contrast to Bessemer clients, who want convenient access
to loans from jumbo mortgages to deal financing and Citibank’s system account managers are
primarily lenders. The same value chain cannot profitably meet the needs of both groups that
require a different set of activities to reach customer in the best way that the rural versus urban
based customer are one example of access driving differences in activities. Positioning is not
only about carving out a niche. A position emerging from any of the sources can be broad
narrow. A focused competitor such as ikea.

The connection with the generic strategies of the sustainable strategic position requires trade offs
of choosing a unique position however is not enough to guarantee a sustainable advantage. But a
strategic position is not a sustainable unless there are a trade offs with other positions. Trade offs
create the need for choice and protect against Repositioners and straddlers. In choosing this
position, Neutrogena said no to the deodorants and skin softness that many customers desire in
their soap. The first is in consistencies in image or reputation thins at the same time.

However the trade offs are essential to strategy. They create the need for choice and purposefully
limits what a company offers. The companies have achieved current best practice, the trade offs
between cost and differentiation is very real indeed. The Honda motor company and Toyota
motor corporation recently bumped up against the frontier. For the past decade , as a manager
have improved operation effectiveness greatly they have good things. And they fit the drives
both competitive advantages and sustainability and the types of fit of functional policies is one of
the oldest idea in strategy and fits lock out imitators by creating a chain that is as strong as its
strongest link and they mapping activity systems.

The vanguard activity systems maps can be usefully for examining and strengthening strategic fit
and competitive value of individual activities cannot be separated from the whole and they fit
sustainability for the southwest airlines activity systems of limited plan for the strategic positions
should have a horizon of a decade or more not of a single planning cycle and having a
alternative views of strategy.

The rediscovering strategy the failure to choose for the growth traps and reconnecting with the
strategies with the profitable growth of the role of leadership at general managements core is
strategy a defining a company’s positions, making a trade-offs and forging fit among activities
for emerging industries and technologies. A company may have to change its strategy if there are
major structural changes in its industry’s and leverages a new system of complementary
activities in to a sustainable advantages.

MANAGING UNCERTAINITY-SUMMARY

Davidson the head of economics and planning started an activity called long term studies at
London head quarters. He was appointed on 18th floor and told to think about future without
knowing what will happen in future that is uncertain futureLiving in the Futures How scenario
planning changed corporate strategy by Angela Wilkinson and Roland kupers in 1965 royal
dutch shell put into service what it called the Unified Planning Machinery, a computer-driven
system meant to bring more discipline to the company's cash flow planning.

Its value lies in how scenarios are embedded in and provide vital links between organizational
processes such as strategy making, innovation, risk management, public affairs, and leadership
development. It helped to break the habit, of most corporate planning of assuming that the future
will look much like the present. And unthreatening stories, scenarios enable Shell executives to
open their minds and think about future.

Scenario planning has now been in use at Shell for more than 45 years. we frequently find
ourselves managing in situations of strategic ambiguity when it isn’t clear where you’re going or
how you’ll get there. It happens because market conditions shift rapidly. Customers have more
choices than ever and resources are less.
His appointment marked the start of a remarkable and still ongoing experiment in using scenario
planning to engage with an uncertain future. Shell-style scenario planning has never really been
about predicting the future.

One U.S. government report from a decade ago estimated that 85% of the scenario studies
surveyed by the report's authors were based on or derived from the Royal Dutch Shell process,
suggesting that Shell's experience contains lessons relevant for anyone-investors, corporations,
governments, nongovernmental organizations, and others-trying to engage with the future.

With help from Betty Sue Flowers, who edited several Shell scenarios in the 1990s, we
discovered that although the practice has evolved over the decades, we can identify the principles
that both define the process at Shell and help explain how it has survived and thrived for so long.

Jimmy Davidson, head of group planning 1967-1976 From the beginning, those engaged with
Shell's scenario practice maintained that scenarios are not predictions but can provide a deeper
foundation of knowledge and self-awareness in approaching the future.

Deductive methods for generating scenarios-for example, a 2x2 matrix with axes for
public/private and more-expensive/less-expensive- were never core to the Shell practice,
although they are often identified with it because Peter Schwartz, who ran the scenario team in
the early 1980s, subsequently promoted their use at the strategy consulting group Global
Business Network.

Shell scenarios are intended to set the stage for a future world in which readers imagine them-
selves as actors and are invited to pay attention to deeply held assumptions about how that world
works. An intuitive understanding of the world Idea in Brief In the mid-1960s Royal Dutch Shell
started experimenting with a new way of looking into the future: scenario planning.

Ged Davis, head of the scenario team 1999-2003, Shell's scenario practice started out by
exposing and questioning the official version of the future. Scenarios prepared in 1971 and 1972
sketched the possibility that the power in oil markets would shift from consumers to oil-
producing nations-and that the interests of those producers would dictate cuts in production, not
the eternal increases foreseen in the business-as-usual version of the future.
As a result, recent Shell scenarios have been more concerned with energy than with social and
economic issues and have been more broadly institutionalized so as to have an impact on
corporate decision making.

Charismatic presenters; evocative graphics; memorable phrases, images, and archetypes;

illustrative graphs of future outlooks; and the preparation of the audience through interviews,
workshops, and other forms of participation all contribute to the storytelling power of Shell's
scenarios.

Deanne Julius, Shell's chief economist 1993-1997 as noted, Shell's scenario practice developed
partly out of dissatisfaction with mechanistic, model-based projections. Shell's scenarios have
never been developed from mechanistic modelling, but they have always been associated with
quantification to enhance internal consistency, reveal deep story logic and systemic insight, and
illustrate outcomes using the language of numbers that characterizes most corporate cultures.

Peter Schwartz later experimented with computer models linked to scenarios as a means of
encouraging serious learning through Play. In the 2001 scenario round, two econometric models
were used after the global scenarios had been developed to quantify the implications for GDP
growth of various patterns of oil and gas price coupling, decoupling, and volatility. Scenarios
Open Doors We facilitated a set of scenarios for the Chinese government.

Over a one-year period we developed the scenarios with them, and it gives you insights into the
way they are thinking that you just can't get otherwise and, of embracing uncertainity and living
in the futures course, you wouldn't get as a business person across the table discussing things
with them.

Doug McKay, scenario team member 1996-2002 Over time, agreement appears to have been
unanimous that scenarios are valuable in external engagement. Since the 1980s, when a
remarkable body of unpublished scenario work on greater China was started by one of their
number, team members have been involved in a variety of scenario initiatives focused on energy,
sustainable development, and other concerns relevant to the Chinese government.

Shell's scenario experts often contributed to other efforts after leaving the company-starting with
Wack, who participated in scenario rounds in South Africa in the 1980s. As one scenario team
member put it, "And then, of course, high oil prices came, and everybody said, 'You're very
clever, you've got that right.' And we all said, 54 HBR Special Issue Summer 2020 'No, wrong.
We're not forecasters. We're your personal trainers. Under Shell's earlier, decentralized structure,
scenarios provided a common learning culture, helped create a shared view of the world, and
refreshed the strategic agenda, enabling new concepts, such as resilience, sustainable
development, and systemic risk, to penetrate the organization

Scenarios can help that Success in the future depends on the future success of decisions, which
can't be known in advance.

The most common question about Shell's scenario practice is "Did it work?" That is did it create
direct business value by enabling better decisions? The answer is "Yes" in the case of more-
focused scenarios and "Only indirectly" in the case of global scenarios.

How can anyone determine in advance if one decision is better than another? In contrast to
decision theory, which assumes that all outcomes can be known, scenarios encourage attention to
the future's openness and irreducible uncertainty.

What does seem clear is that a sustained scenario practice can make leaders comfortable with the
ambiguity of an open future.

COMPETING FOR THE FUTURE

Look around your company. Look at the high-profile initiatives that have recently been
launched, the issues preoccupying senior management, the criteria and benchmarks, by which
progress is measured, your track record of new-business creation. Look into the faces of your
colleagues, and consider their ambitions and fears. Look toward the future, and ponder your
company’s ability to shape that future in the years and decades to come.When we talk to senior
managers about competing for the future, we ask them three questions. They are:-
First, what percentage of your time is spent on external rather than internal issues.
Second, of this time spent looking outward, how much do you spend considering how the world
may change in five or ten years rather than worrying about winning the next big contract or
responding to a competitor’s pricing move?
Third, of the time devoted to looking outward and forward, how much do you spend working
with colleagues to build a deeply shared, well-testedperspective on the future as opposed to a
personal and idiosyncratic view?
The answers to these questions typically conform to what we call the “40/30/20 Rule.”In our
experience, about 40% of a senior executive’s time is devoted to looking outward and, of this
time, about 30% is spent peering three, four, five, or more years into the future. Of that time
spent looking forward, no more than 20% is devoted to building a collective view of the future
(the other 80% is spent considering the future of the manager’s particular business). Thus, on
average, senior managers devote less than 3% (40% x 30% x 20%) of their time to building a
corporate perspective on the future. In some companies, the figure is less than 1%. Our
experience suggests that to develop a distinctive point of view about the future, senior managers
must be willing to devote considerably more of their time. And after the initial burst of energy
that they must expend to develop a distinct view of the future, managers must be willing to adjust
that perspective as the future unfolds.Such commitment as well as substantial and sustained
intellectual energy is required to answer such questions as: What new core competencies will we
need to build? What new product concepts should we pioneer? What alliances will we need to
form? What nascent development programs should we protect? What long-term regulatory
initiatives should we pursue?We believe such questions have received far too little attention in
many companies, not because senior managers are lazy—most are working harder than ever—
but because they won’t admit, to themselves or to their employees, that they are less than fully in
control of their companies’ future. Difficult questions go unanswered because they challenge the
assumption that top management really is in control, really does have more accurate foresight
than anyone else in the corporation, and already has a clear and compelling view of the
company’s future. Senior managers are often unwilling to confront these illusions. So the urgent
drives out the important; the future is left largely unexplored; and the capacity to act, rather than
to think and imagine, becomes the sole measure of leadership.The painful upheavals in so many
companies in recent years reflect the failure of onetime industry leaders to keep up with the
accelerating pace of industry change. For decades, the changes undertaken at Sears, General
Motors, IBM, Westinghouse, Volkswagen, and other incumbents were, if not exactly glacial in
speed, more or less linear extrapolations of the past. Those companies were run by managers, not
leaders,by maintenance engineers, not architects.If the future is not occupying senior managers,
what is? Restructuring and reengineering.A company’s organizational transformation agenda
typically includes downsizing, overhead reduction, employee empowerment, process redesign,
and portfolio rationalization.Masquerading behind terms like refocusing, delayering,
decluttering, and right-sizing, restructuring always results in fewer employees.In 1993, large
U.S. companies announced nearly 600,000 layoffs—25% more than were announced in 1992
and nearly 10% more than in 1991, the year in which the U.S. recession hit its lowest point.
While European companies have long tried to put off their own day of reckoning, bloated
payrolls and out-of-control employment costs have made downsizing as inevitable in the old
world as it is in the new. Despite excuses about global competition and the impact of
productivity-enhancing technology, most layoffs at large U.S. companies have been the fault of
senior managers who fell asleep at the wheel and missed the turnoff for the future.

“Most layoffs at large U.S. companies have been the fault of senior managers who fell asleep at
the wheel and missed the turnoff for the future.”

With no growth or slow growth, companies soon find it impossible to support their burgeoning
employment rosters and traditional R&D budgets and investment programs. The problems of low
growth are often compounded by inattentiveness to ballooning overheads (IBM’s problem),
diversification into unrelated businesses (Xerox’s foray into financial services), and the paralysis
imposed by an unfailingly conservative staff. It is not surprising that shareholders are giving
moribund companies unequivocal marching orders: “Make this company lean and mean;” “Make
the assets sweat;” “Get back to basics.” In most companies, return on capital employed,
shareholder value, and revenue per employee have become the primary arbiters of top
management performance. Although perhaps inescapable and in many cases commendable,
restructuring has destroyed lives, homes, and communities in the name of efficiency and
productivity. While it is impossible to argue with such objectives, pursuing them single-
mindedly does the cause of competitiveness as much harm as good.
The United States and Britain have produced an entire generation of managers obsessedwith
denominators. They can downsize, declutter, delayer, and divest better than any other managers.
Even before the current wave of downsizing, U.S. and British companies had, on average, the
highest asset-productivity ratios of any companies in the world. Denominator management is an
accountant’s shortcut to asset productivity.The social costs of such denominator-driven job
losses are high. Although an individualcompany may be able to avoid some of those costs,
society cannot. Downsizing also causes employee morale to plummet. Restructuring seldom
results in fundamental business improvements. At best, it buys time.Downsizing attempts to
correct the mistakes of the past, not to create the markets of the future. But getting smaller is not
enough. Recognizing that restructuring is a dead end, smart companies move on to
reengineering. The difference between restructuring and reengineering is that the latter offers at
least the hope, if not always the reality, of getting better as well as getting leaner. Yet in many
companies, reengineering is more about catching up than getting out in front. Managers often try
to make a virtue out of imitation, dressing it up in the fashionable colors of “adaptiveness,” what
they are adapting to all too often are the preemptive strategies of more imaginative competitors.

“If managers don’t have detailed answers to questions about the future, their companies can’t
expect to be market leaders”.

We meet many managers who describe their companies as “market leaders.” But market
leadership today certainly doesn’t equal market leadership tomorrow.If senior executives don’t
have reasonably detailed answers to the “future” questions, and if the answers they have are not
significantly different from the “today” answers, there is little chance that their companies will
remain market leaders. The market a company dominates today is likely to change substantially
over the next ten years. There’s no such thing as “sustaining” leadership; it must be regenerated
again and again.Organizational transformation must be driven by a point of view about the future
of the industry: How do we want this industry to be shaped in five or ten years? What must we
do to ensure that the industry evolves in a way that is maximally advantageous for us? What
skills and capabilities must we begin building now if we are to occupy the industry high ground
in the future? How should we organize for opportunities that may not fit neatly within the
boundaries of current business units and divisions?One company that developed a process for
establishing a point of view about the future is Electronic Data Systems (EDS), based in Plano,
Texas. In 1992, EDS’s position seemedunassailable. With $8.2 billion in sales, EDS had
recorded its thirtieth consecutive year of record earnings and looked forward to the ever-growing
demand for computerservicesoutsourcing. EDS expected to become at least a $25 billion
company by the year 2000. But some top executives, including Chairman Lester Alberthal,
foresaw problems.Margins were under intense pressure from new competitors, such as Andersen
Consulting. Customers were demanding hefty discounts in their long-term service contracts.
Fewer new customers could be found among leading-edge IT users in the United States. And
future business needs would involve desktop computers, not the mainframes EDS specialized in,
while the most exciting new information-network services would focus on the home, not the
office. The company’s top officers, known as the Leadership Council, concluded that EDS was
no more immune from “great company disease” than any other successful enterprise. Council
members committed themselves to rebuilding industry leadership for the 1990s and beyond. As it
happened, others in the company were already thinking along similar lines. Back in 1990, a small
band of EDS managers, none of them yet corporate officers, had created a Corporate Change
Team. Despite their lack of an official charter, team members believed EDS needed to rethink its
direction and its deepest assumptions. They soon realized this would require far more resources,
both temporal and intellectual, than could be mustered by one small team. After talking with the
Leadership Council about its goals, the Corporate Change Team developed a unique approach to
company renewal. From across the company and around the world, 150 EDS managers—key
resource holders as well as less-senior managers who were known to be challenging, bright, and
unconventional—gathered inDallas, 30 at a time, to begin creating the future. Each of the five
“waves” considered in detail the economic threats to EDS and the opportunities afforded by the
digital revolution. Each wave was given an assignment. The first wave studied the discontinuities
that EDS could use to change the shape of the industry. The second and third waves tried to
develop a view of the company’s competencies that was substantially independent from current
definitions of EDS’s served markets. They then benchmarked those competencies against EDS’s
strongest competitors. Drawing on the work of the previous waves, wave four explored
opportunities on the horizon.And wave five considered how to devote more company resources
to building competencies and developing opportunities. Each wave’s output was thoroughly
debated by the other waves and with the Leadership Council. Finally, a team composed of
members from all the waves produced a draft corporate strategy, which, again, was debated
throughout the company.EDS’s new strategy is captured in three words: globalize,
informationalize, and individualize. The strategy is based on the company’s ability to use
information technology to span geographical, cultural, and organizational boundaries; to help
customers convert data into information, information into knowledge, and knowledge into
action; and to mass-customize and enable individuals to mass-customizeinformation services and
products.EDS emerged from the process with a view of its industry and its role that
wassubstantially broader, more creative, and more prescient than it had been 12 months
earlier.To create the future as EDS has done requires industry foresight. Industry foresight is a
synthesis of many people’s visions.Senior executives are not the only ones with industry
foresight.Developing a point of view about the future should be an ongoing project sustained by
continuous debate within a company, not a massive one-time effort.

SAUMMARY OF TRANSIENT ADVANTAGE

That idea is at the core of most strategy investment strategy it’s central to the success of
companies and even today there are company’s periods of time—firms such as GE, IKEA,
Unilever Company to maintain a truly lasting advantage. Leaders in these businesses can
compete effectively.

In a world where a competitive advantage often evaporates in less than a year, companies can’t
afford to spend months at a time crafting a single long-term strategy.
Constantly start new strategic initiatives, building and exploiting many transient competitive
advantages at once.

Individually temporary, these advantages, as a portfolio, can keep companies in the lead over the
long run. Have figured this out—such as Milliken & Company, a U.S.-based textiles and
chemicals company; Cognizant, a global

IT services company; and Brambles, a logistics company based in Australia—have abandoned

the assumption that the stages of competitive advantage is develop and manage a pipeline of
Stability in business is the norm.

They view strategy differently—as more fluid, more customer-centric, less Sustainable
competitive advantage is now the exception, not the rule.

Transient advantage is the new normal. The Anatomy of a Transient Advantage

Any competitive advantage—whether it lasts two seasons or two decades—goes through the
same life cycle. But when advantages are fleeting, firms must rotate through the cycle much
more a competitive advantage begins with a launch process, in mobilizes resources to capitalize
on it.

Company needs people who are capable of filling in blank with the kind of structure required to
manage a large, scale. This period calls for people who can assemble the right resources at the
right time with the right quality and then if a firm is fortunate, it begins a period of exploitation.

At this point a company needs people who are Traditional established companies have plenty of
talent with so the firm has to reconfigure what it’s doing to keep the advantage fresh.

In some cases the advantage is completely eroded, compelling the company to begin a
disengagement process in whichresources are extracted and reallocated to the next-generation
advantage.

To manage this process, you need people stage of an advantage’s development.And if they’re
creating a pipeline of competitive advantages, the challenge is even

Milliken & Company is a fascinating example of an organization that managed to overcome the
competitive forces that

Annihilated its industry (albeit over a longer time period than some companies today will be
granted).business of textile manufacturing to Asia.

Ultimately, the company exited most of its textileAs a result, a company that had been largely
focused

Many businesses in exploit mode stick with a level of quality higher than customers are prepared
to pay for. Cheaper, simpler offer is good enough, customers will abandon the incumbent.
In most companies, executives running big, profitable businesses get to call the shots.

I remember holding a Nokia product that was remarkably similar to today’s I Pad—did Nokia
never capitalize on this ground breaking innovation?

Because the company’s emphasis was on mass-market

When I ask executives about the biggest barriers to innovation, I often hear, “Well, these things
fall between the cracksof our organizational structure.” When opportunities don’t fit their
structure, firms often simply forgo them instead ofservices because they require coordination of
activities along a customer’s experience, rather than by product line.

In a lot of companies, the more assets and employees you manage, the better.

Many companies do not have a system for creating a pipeline of new advantages.

As a result, innovation is an on-again, off-again process that is driven by individuals, making it

extraordinarily vulnerable to swings in the business cycle.

The assessment “Is Your Company Prepared for the Transient-Advantage Economy?” will give
you a sense ofwhether your organization is vulnerable to these traps.

Companies that want to create a portfolio of transientadvantages need to make eight major shifts
in the way thatis that by looking at data about other firms like yours, youmainly comparing your
company to others in a similarindustry. I’ve seen untraditional competitors take companies
byand online video have created consternation in traditional phone businesses; retailers like wall
mart have begun edginginto health care; and the entire activity of making payments is being
disrupted by players from a variety of industries.

Today strategy involves orchestrating competitive moves in what I call “arenas.” An arena is a
combination of acustomer segment, an offer, and a place in which that offers is delivered.

It isn’t that industries aren’t relevant anymore; indeed the very notion of a transient
competitiveadvantage is less about making more money than your industry peers, as
conventional definitions would have it, andmore about responding to customers’ “jobs to be
donein a given space.

Today’s gifted strategists examine the data, certainly, but they also use advanced patternthose
themes, they free people to try different approaches and business models.

Their business models, reinvent their workforces, and rewire their operations—all with the firm’s
assistance, of course.

When advantages come and go, conventional metrics can effectively kill off innovations by
imposing decision rulescompanies to underinvest in new opportunities.
Instead, firms can use the logic of “real options” to evaluate new moves.

Hanson, the company’s vice president of design innovation, said at a recent conference at
Columbia Business School,Even service offerings in many industries

Once a company has demonstrated that demand for something exists, competitors

What customers crave—and few companies provide—are well-designed experiences and

completeUnfortunately, many companies are so internally focused that they’re oblivious to the
you call up your friendly local cable company or telephone.

BLUE OCEAN STRATEGY

Competing in overcrowded industries is no way to sustain high performance. The real
opportunity is to create blue oceans of uncontested market space by –

w. Chan Kim and Renee Mauborgne

Blue ocean strategy -

Blue Ocean Strategy is referred to a market for a product where there is no competition or very
less competition. This strategy revolves around searching for a business in which very few firms
operate and where there is no pricing pressure

Red ocean strategy -

Red oceans are all the industries in existence today – the known market space, where industry
boundaries are defined and companies try to outperform their rivals to grab a greater share of the
existing market. Cutthroat competition turns the ocean bloody red. Hence, the term ‘red’ oceans

Blue Ocean Strategy is a systematic and repeatable process to help anyone find a blue ocean of
uncontested market opportunity in any industry.

It does this through the application of a set of

1. tools (that help you map strategic opportunities),

2. frameworks (that help you “think” in a blue ocean creating way), and
3. principles (that help you stay on track as you generate and implement your strategy)

Blue Oceans are more about huge, expansive market spaces where all "fishes" - big and small
coexist, with their standard "defences" - and where Darwinism holds strong. Blue denotes the
new and the still happening. It doesn't yet truly exist. There are no limits yet - like the sky. And
hence, Blue Oceans, conceptually, are huge.
Red oceans are the opposite of the Blue. They include all the verticals and spaces in existence
today—the known ones, in which companies fight for for the limited pie. In red oceans, the
boundaries are defined and accepted, and the competitive rules of the game are well understood.

Gradually, as the Red Oceans get more and more crowded, prospects for profits and growth are
reduced. Products turn into commodities, and increasing competition turns the water bloody red!.

In blue oceans, demand is created rather than fought over. There is ample opportunity for growth
that is both profitable and rapid.

Blue Ocean strategists look at entering spaces where entry barriers are low, there's futurity to
business and existence, and disruptions don't disturb much.

Blue Ocean Strategy can be explained as creation of uncontested market space and thus making
the competition irrelevant.

For example, the 'Cash on Delivery' (COD) Option was first introduced in India by Flipkart, thus
creating a uncontested market space. The COD strategy helped the company differentiate itself
from the red ocean of e-commerce and allowed it to gain credibility and popularity among the
crowds.

In blue Ocean, demand is created rather than fought over. There is ample opportunity for growth
that is both profitable and rapid

Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a new
market space and create new demand. It is about creating and capturing uncontested market
space, thereby making the competition irrelevant. It is based on the view that market boundaries
and industry structure are not a given and can be reconstructed by the actions and beliefs of
industry players.

So it basically refers to taking your product to a new market space and creating a new demand
for the product

For example- Starbucks is a company that implemented the Blue Ocean Strategy successfully.
There were many coffee shops that were more established when Starbucks came on the scene.
Instead of focusing on their coffee, they worked to brand Starbucks as something different,
reaching an untapped level of consumers.
They offered coffee, but they also offered teas, smoothies, and Frappuccino. They also sold CDs
and newspapers, encouraging coffee lovers to stay around and chat. This allowed Starbucks to
become a social venue as well.

Red ocean versus blue ocean strategy

Red ocean strategy Blue ocean strategy

Compete in existing market space create uncontested market 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