By W. Chan Kim & Rene MauborgneHarvard Business Review

Presented By:

Sadaf FatimaKhadija IqbalKashif Shazad

BLUE OCEAN STRATEGY Competing in over crowded industries is no way to sustain high performance. The real opportunity is to create Blue Oceans of uncontested market space

Red Ocean vs. Blue Ocean

Compete in existing market spaceBeat the competitionExploit existing demandMake the value/cost trade-offAlign the whole system of companys activities with its strategic choice of differentiation OR low costCreate uncontested market spaceMake the competition irrelevantCreate and capture new demandBreak the value/cost trade-offAlign the whole system of a companys activities in pursuit of differentiation and low cost

Cirque du Soleil

Founded in 1984 by street performers

Stages productions seen by 40 million people in 90 cities around the world

Cirque du Soleil has achieved in 20 years time what Ringling Bros. And Barnum & Bailey the worlds leading circus more than 100 years to attain

About Circus IndustryWhen CDS was founded the circus industry was in decline (and is still declining)

Other forms of entertainment was available (sports, TV, videos)

Animal rights issues

High priced Circus star performers

Ringling and Barnums name a barrier to entry (more than 200 years combined)

CdS Blue Ocean StrategyRevealing Tagline : We Reinvent the Circus

CdS did not make money by competing within the confines of an existing industry

CDS did not steal from Ringling or Barnum

CdS created uncontested market space that made the competition irrelevant

RESULT : CdS increased revenues by a factor of 22 over the last 10 years

Why not Red Ocean?Companies try to outperform rivals in order to grab greater share of existing demand

Space gets more crowded

Prospects for profits and growth reduced

Products turn into commodities

Increasing competition turns water bloody

Why BLUE OCEAN?Blue oceans denote all industries NOT in existence today

The Unknown market space

Untainted by competition

In Blue Oceans, demand is created not fought over

In Blue Oceans, growth is profitable and rapid

2 ways to create Blue Oceans

Companies can give rise to complete new industries,

Example : Ebay with the online auction industry

Created WITHIN a Red Ocean when a company alters the boundaries of an existing company,

Example : Cirque du Soleil

Think?The term blue oceans is New but it has always been with us

What industries were unknown 100 years ago?

AutomobilesMusic recordingAviationPetrochemicalsPharmaceuticalsManagement Consulting

What industries will be in next 100 years?

AUTOMOBILE

Key Blue Ocean CreationsBlue Ocean created by a new entrant or incumbent?Driven by technology or value pioneering?At time of creation, industry attractive or unattractive?Ford Model TNew EntrantValue (mostly existing technologies)UnattractiveGMs car for every purse and purposeIncumbentValue (some new technologies)AttractiveJapanese fuel-efficient carsIncumbentValue (some new technologies)UnattractiveChrysler minivanIncumbentValue (mostly existing technologies)Unattractive

COMPUTERS

Key Blue Ocean CreationsBlue Ocean created by a new entrant or incumbent?Driven by technology or value pioneering?At time of creation, industry attractive or unattractive?CTR tabulating machine (CTR is now IBM)IncumbentValue (some new technologies)UnattractiveApple personal ComputerNew EntrantValue (mostly existing technologies)UnattractiveCompaq PC ServersIncumbentValue (mostly existing technologies)NonexistentDell built-to-order computersNew EntrantValue (mostly existing technologies)Unattractive

MOVIE THEATERS

Key Blue Ocean CreationsBlue Ocean created by a new entrant or incumbent?Driven by technology or value pioneering?At time of creation, industry attractive or unattractive?NickelodeonNew EntrantValue (some new technologies)NonexistentPalace TheatersIncumbentValue (mostly existing technologies)AttractiveAMC multiplexIncumbentValue (mostly existing technologies)UnattractiveAMC megaplexIncumbentValue (mostly existing technologies)Unattractive

In the study of 108 companiesProfit & Growth

What focusing on the red ocean means?It means accepting the key constraints of war

Limited landThe need to beat an enemy to succeed

Denying the distinctive strength of the business world the capacity to create new market space that is uncontested

BLUE OCEAN FINDINGS

Blue Oceans are not about technology innovation(Ford-T)

Incumbents often create blue oceans and usually within their core businesses (Cirque du Soleli)

Company and industry are wrong units of analysis

Creating Blue Oceans builds brands(Ford-T in 1908)

What then is the most appropriate unit of analysis?

To explain blue oceans it must be the :

STRATEGIC MOVE the set of managerial actions and decisions involved in making a major market-creating business offering

The Simultaneous search of Differentiation and Low Cost

Blue oceans are created in the region where a companys action affects 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 creating elements the industry never offered

Example: Cirque du Soleil

Blue Ocean barriers to imitationEasier to imagine than to doCustomers attracted in large volumesAchieve scale economies easily Example: Wal-Mart, eBay

Imitating whole system is not an easy task

Example: Continental Air line Vs Southwest Airlines

THANK YOU

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