Blue Ocean by W. Chan Kim and Renée Mauborgne Harvard Business Review 2004 Carolina Appelqvist - 40090 Helena Brodbeck - 40093 Mikael Meijer - 40079 Riikka Murto - 40097
AGENDA Executive summary Red ocean strategy Blue ocean strategy Nintendo WII
EXECUTIVE SUMMARY Red Oceans represent the industries existing today, which are characterized by competition about existing demand. A blue ocean strategy creates new demand and market space, which makes competition irrelevant. It also lacks the trade-off between cost and value, making it possible to pursue differentiation and low cost simultaneously. This will be demonstrated by the example of Nintendo Wii.
Strategic analysis Environment Organization Industry Internal analysis RBV Model Inside->Out External analysis I/O Model Outside->In
FROM RED OCEANS
"Red oceans represent all the industries in existence today
- the known market space"
In red oceans:
industry boundaries are defined and accepted
competitive rules of the game are well understood
companies try to outperform their rivals in order to get a greater share of existing demand
prospects for profit and growth are reduced
products turn into commodities
TO BLUE OCEANS
"Blue oceans denote all the industries not in existence today
- the unknown market space, unattained by competition"
In blue oceans demand is created, rather than fought over
2 ways to create blue oceans:
give rise to completely new industries
create blue ocean from within red ocean by altering the boundaries of an existing industry
BLUE OCEAN STRATEGY
Blue oceans are not about technology innovation
Blue oceans are often created by incumbents - and usually within their core business
Company and industry are the wrong units of analysis
Creating blue oceans builds brands
creators of blue oceans never use competition as benchmark
no trade-off between value and cost -> blue ocean strategy pursues differentiation and low cost simultaneously
RED OCEAN VERSUS BLUE OCEAN 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 Align the whole system of a company's activities with its strategy choice of differentiation or low cost Align the whole system of a company's activities in pursuit of differentiation and low cost.
NINTENDO WII Industry situation before Wii: different gaming consoles were fighting for market share Wii stretched the boundaries of the industry by combining video gaming with doing sports. It created a blue ocean by both value and technology pioneering.
NINTENDO WII Source: http://www.valueinnovation.net/2008/04/nintendo-wii-blue-ocean-strategy.html
'Red and blue have always coexisted and always will' (Kim & Mauborgne 2004)