BLUE OCEAN STRATEGY

MEANING OF BLUE OCEAN STRATEGY:

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 plentiful opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules are different and waiting to be set. Most are created from Red oceans by expanding industry boundaries in Blue Oceans, competitions are irrelevant.

MEANING OF RED OCEAN STRATEGY:

Red Oceans are all the industries in existence today, the known market space. In the red oceans, industry boundaries are defined and accepted, and the competitive rules are known. Here companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced.

SEQUENCE OF BLUE OCEAN STRATEGY:

PRICEIs your price easily accessible to the mass of buyers

YES

COST Can you attain your cost target to profit at your strategic price

YES

ADOPTIONWhat are the adoption hurdles in actualizing your business idea?Are you addressing them up?

YES

Commercially viable blue ocean idea

BUYER UTILITYIs there exceptional buyer utility in your business idea?

SIX PRINCIPLES OF BLUE OCEAN STRATEGY:

Reach beyond the existing. Reconstruct market boundaries. Focus on the big picture, not the numbers. Get the strategic sequence right. Overcome key organisation hurdles. Build execution into strategy.

DIFFERENCES BETWEEN RED OCEAN STRATEGY AND BLUE OCEAN STRATEGY

BLUE OCEAN STRATEGY RED OCEAN STRATEGY

1). Create un contested market space.

2).Market competition irrelevant.

3).Create and capture new demand.

4).Break the value cost trade-off.

5).align the whole system of a firm is activities in pursuit of differentiation and low cost.

1). Compete in existing market space.

2).Beat the competition.

3).Exploit existing demand.

4).Make the value cost trade-off.

5).Align the whole system of a firms activities with its strategic choice of differentiation.

THE IMPACT OF CREATING BLUE OCEAN STRATEGY:

We get out to quantity the impact of creating blue oceans on a company’s growth and in both revenues and profits. We found that 86% of the companies launches in Red Ocean of existing market space. They accounted for only 62% of total revenues and remaining 38% is total profits out off 100%.

The remaining 14% of the company’s launches were aimed at creating Blue Ocean. They generated 39% of total revenues and 61% of total profits out off 100%.

EXAMPLES OF BLUE OCEAN STRATEGY:

SOUTHWEST AIRLINES:

Southwest Airlines, a US company, made history as the world's first low-cost carrier. Southwest Airlines analysed alternative industries and created new benefits for their non-customers: cost-sensitive travellers who rather drive.

The low-cost carrier thus positioned itself as a competitor to the car not to other airlines and adapted its strategy to the new requirements:

Reduced prices due to the elimination of additional services. Improved check-in times. Increased flight frequency.

This new combination created an offering that enabled the customer to benefit from the high travelling speeds of an airplane at low prices combined with the flexibility of travelling by car.

THE BODY SHOP:

The Body Shop also created a Blue Ocean – and in the fiercely competitive cosmetics industry. The Body Shop ignored most glamorous aspects of the industry. Instead The Body Shop designed its image around functionality, reduced prices and modest packaging. Increased value was given to natural ingredients, a healthy lifestyle and ethical concerns.

As a result The Body Shop’s products spoke to a totally new group of customers and achieved a high degree of cost savings (generally approx. 85% of costs in the cosmetics industry arise from packaging and advertising).

Cirque du Soleil:

The company was founded in 1984 by Guy Lailberte. Initially in 1980 the group toured

performing as "The Wanders" before they incorporated. During those years they experience financial

hardship and needed government funding to stay afloat which they received in 1983. In 1984 they

changed their performance to one without animals and one that focused on character driven theatrical

approach. By using the blue ocean strategy it has become the largest theatrical producer in the world

with over $1 Billion in revenue annually as of 2011.

Product Changes :

Eliminate: removed animals and star performers,

Reduce: reliance and variety of food and drink concessions

Raise: increased prominence of acrobats, increased focus on visual performance (lights, timing of acts

etc.), raised the level of comfort, elegance and sophistication of the venue

Create: added dancing numbers and musical theatre, added multiple productions/shows giving people

a reason to return.

Apple: The company was founded in 1976 by Steve Jobs and Steve Wozniak. It is the largest company

in the world by market capitalization. For almost two decades Apple focused on manufacturing

computer software systems until in 2001 it implemented a blue ocean strategy and launched the iPod

music player, which revolutionized how people listened to music. 

Product Changes (iPod)

Eliminate: Need to carry CDs

Reduce: Size of device

Raise: Song capacity, ease of use to navigate to/through songs, color options, sound quality

Create: Ability to download to the device, fashion image, additional audio products (podcasts &

audiobooks), and place to legally download music