Article

Book review on Blue Ocean Strategy

-by sharad kumar rathore

from (MBA MM) 1st year

What are red oceans and blue oceans:

In their classic book, Blue Ocean Strategy, Chan Kim & Renée Mauborgne
coined the terms ’red ocean’ and ‘blue ocean’ to describe the market universe.

Red oceans are all the industries in existence today – the known market space.
In red oceans, industry boundaries are defined and accepted, and the
competitive rules of the game are known.

Here, companies try to outperform their rivals to grab a greater share of

existing demand. As the market space gets crowded, profits and growth are
reduced. Products become commodities, leading to cutthroat or ‘bloody’
competition. Hence the term red oceans.

Blue oceans, in contrast, denote all the industries not in existence today – the
unknown market space, untainted by competition. In blue oceans, demand is
created rather than fought over. There is ample opportunity for growth that is
both profitable and rapid.

In blue oceans, competition is irrelevant because the rules of the game are
waiting to be set. A blue ocean is an analogy to describe the wider, deeper
potential to be found in unexplored market space. A blue ocean is vast, deep,
and powerful in terms of profitable growth.

The book is divided into three parts:

1. The first part presents key concepts of blue ocean strategy, including Value Innovation
– the simultaneous pursuit of differentiation and low cost – and key analytical tools and
frameworks such as the strategy canvas and the four actions framework. The four

1
 actions framework aids in eliminating the trade-off between differentiation and low cost
within a company. The four actions framework consists of the following:

• Raise: This questions which factors must be raised within an industry in terms of
product, pricing or service standards.
• Eliminate: This questions which areas of a company or industry could be
completely eliminated to reduce costs and to create an entirely new market.
• Reduce: This questions which areas of a company’s product or service are not
entirely necessary but play a significant role in your industry, for example, the cost
of manufacturing a certain material for a product could be reduced. Therefore, it
can be reduced without completely eliminating it.
• Create: This prompts companies to be innovative with their products. By creating
an entirely new product or service, a company can create their own market through
differentiation from the competition.

2. The second part describes the four principles of blue ocean strategy formulation. These
four formulation principles address how an organization can create blue oceans by looking
across the six conventional boundaries of competition (Six Paths Framework), reduce their
planning risk by following the four steps of visualizing strategy, create new demand by
unlocking the three tiers of noncustomers and launch a commercially viable blue ocean idea by
aligning unprecedented utility of an offering with strategic pricing and target costing and by
overcoming adoption hurdles. The book uses many examples across industries to demonstrate
how to break out of traditional competitive (structuralist) strategic thinking and to grow
demand and profits for the company and the industry by using blue ocean (reconstructionist)
strategic thinking. The four principles are:

1. how to create uncontested market space by reconstructing market boundaries,

2. focusing on the big picture,
3. reaching beyond existing demand and supply in new market spaces
4. getting the strategic sequence right.

3.The third and final part describes the two key implementation principles of blue ocean
strategy including tipping point leadership and fair process. These implementation principles
are essential for leaders to overcome the four key organizational hurdles that can prevent even
the best strategies from being executed. The four key hurdles comprise the cognitive, resource,
motivational and political hurdles that prevent people involved in strategy execution from
understanding the need to break from status quo, finding the resources to implement the new
strategic shift, keeping your people committed to implementing the new strategy, and from
overcoming the powerful vested interests that may block the change.