Blue Ocean Strategy

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In this presentation, we will introduce the concept of “Blue Ocean Strategy”, to help you understand and gain a strong foothold in online competitive market place.
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Blue Ocean Strategy

  1. 1. Chapter 1Creating Blue Oceans
  2. 2. “Like” us on Facebook:  p // /http://www.facebook.com/welearnindia “Follow” us on Twitter:http://twitter.com/WeLearnIndiahttp://twitter com/WeLearnIndiaWatch informative videos on Youtube: http://www.youtube.com/WelingkarDLP
  3. 3. ObjectivesAfter reading this chapter you will be able to:• Understand the term “Blue Ocean”• Know how to make a Competition Irrelevant• Know how to create Blue Oceans• Familiarize with Pillars of Blue Ocean Strategy
  4. 4. Introduction• Guy Laliberte, the Chief Executive Officer of Cirque du Soleil• He was a famous accordion player• Laliberte and his group of street performers founded Cirque in 1984• It became one of the Canada’s largest cultural exponent
  5. 5. Introduction• Huge earnings of Cirque was not made out of a thriving industrial activity• Many adverse phenomena were confronted by Guy and friends for the outstanding performance of Cirque• It was possible to them to make such a rapid growth due to the supplier power on the part of the star performer
  6. 6. Introduction• The Ringing Brothers and Barnum and Baily famous in circus field are competitors to Cirque• In reality, there was no such competition between them• It was quite well meant and apt to title their first production as “We reinvent the Circus”
  7. 7. Introduction• Cirque du Soleil realized that companies should avoid direct competition for steady growth in the future• Cirque made the noteworthy achievement as they could envision the two market space – the red oceans and the blue oceans
  8. 8. Introduction• The red oceans have well defined and laid down rules and regulations to rein in them in a competitive field• They try to outperform each other to grab a greater share of the market leading to overcrowding the limited market space• On the contrary, the blue oceans can creat demand and thus an opportunity for highly profitable growth on their own
  9. 9. Introduction• The red oceans have to struggle and make their own way outsmarting the rivals successfully so as to be in business• The real focus has been on competition based red ocean strategy
  10. 10. How to create Blue Oceans• If we look back, we could see that many leading industries of today are blue oceans in the past• The non existent blue oceans today are really existent red oceans of t0morrow• Though the term ‘Blue Ocean’ is new but the existence of such phenomenon is not new
  11. 11. How to create Blue Oceans• Just as evolution of the mankind, the industry also undergoes constant evolution resulting of new and modified industrial entity• It could be seen that the corporate strategy is heavily influenced with military strategy
  12. 12. The End Result of creating Blue Ocean• Incremental improvement of about 86% within the existing market space• Remaining 14% of launches were for creating blue oceans which generated 38% of total revenue entered which yield 61% of total profit
  13. 13. The End Result of creating Blue Ocean• Impact of creation of Blue Oceans on Profit and Growth 14% 38 61% % 86 % 62 % 39 % Launches in existing market space (Red Oceans) Launches in non-existing market space (Blue Oceans)
  14. 14. Why is Creating Blue Oceans Mandatory• There are many imperatives of creating blue oceans• The population curve shows a downward trend causing the demand curve to take a plunge• Total dissatisfaction of the existing industry enable hem to come out with new and better quality prices
  15. 15. Strategic Move• There are certain questions deserve the attention like – Can a company escape from the throttling grip of red ocean competition? – Is there a calculated decisive and systematic approach to achieve the blue oceans?• The first and foremost thing is to define the basic unit for our research analysis
  16. 16. Strategic Move• “In search of Excellence” was a best-seller published around 20 years ago• At the same time its contemporary ‘Built to Last’ was able to trade its stand• “Built to Last became a best seller as they could earn the trust of readers as well as the corporate analysers
  17. 17. Strategic Move• For Example: – HP was featured by ‘Built to Last’ as outperforming the market over a long time – According to ‘Creative Destruction’ the companies those were set to the market leaders by ‘Built to Last’ never existed
  18. 18. Strategic Move• The companies can create their own blue oceans and shape them up into high performers• It was possible for Cirque de Soleil to create a new market space of their own in entertainment sector
  19. 19. Strategic Move• The strategic move was required to create and sustain excellency in performance• Example: – Compaq was able to take the blue ocean strategy in creating the server industry
  20. 20. Strategic Move• The products and services delivered by the strategic moves were able to open up new and much rewarding market space
  21. 21. Strategic Move• Common factors that led to creation of blue oceans and came out of the stranglehold of the red oceans were – Victorious group of small and large companies – Managed by young and inexperienced people as well as old and experienced ones – Low-tech and high-tech – Domestic as well as multinational
  22. 22. Pillars of Blue Oceans Strategy• The companies caught in the red ocean followed a conventional approach of defending themselves from being beaten by their rivals from the stiff competition• The logic behind creation of the blue ocean strategy was to make the competition irrelevant
  23. 23. Pillars of Blue Oceans Strategy• Value sans innovation means improving value but not making the firm foothold in the marker place• Approach of blue oceans is to provide both, differentiation and low cost together
  24. 24. Pillars of Blue Oceans Strategy• The efforts adopted by Cirque de Soleil helped only in rising costs and without any upward trend in revenue earnings• It should be noticed that Cirque did the competitors without actually taking part in the competition
  25. 25. Pillars of Blue Oceans Strategy• It was an all-in-all way out from the circus traditions and customs the Cirque brought out• The changes were both innovative and value-added and turned out to be a real crowd puller
  26. 26. Pillars of Blue Oceans Strategy• Cirque also introduced hitherto non-circus factors like a story-line, artistic music etc.• In many ways is kept a close resemblance to a theater• The visual performance was made more meaningful and attractive
  27. 27. Pillars of Blue Oceans Strategy• Cirque introduced the concept of multiple production to keep up the tempo of harvesting the market of entertainment world• Cirque played a dual role of a circus and a theater simultaneously
  28. 28. Pillars of Blue Oceans Strategy• The diagram show how the blue ocean strategy is interrelated with the dual strategy of both innovation and value Costs Innovation Value Buyer Value• Value innovation means to give more value to its buyer as well as achievement of a leap in value by the industry
  29. 29. Red Ocean Vs. Blue Ocean Strategy Red Ocean Strategy Blue Ocean StrategyCompete in the existing market space No competition – create non- existing, unrestricted market spaceBeat the competition and emerge out Make the very competition irrelevantof redExploit existing demand Create and grab new demandMake the value-cost trade-off Break the value-cost trade-offAlign the activities with it strategy of Align activities in pursuit ofdifferentiation on or low cost differentiation on or low costwhatever
  30. 30. Blue Ocean Strategy – Formulation &Execution• The chances of success are bit lower when companies venture beyond the existing market space• Companies have yet to make up their mind towards the call of blue oceans
  31. 31. Principles & Risk Factors of Blue Ocean Strategy The Six Principles of Blue Ocean Strategy Formulation principles Risk Factor for each principle1. Reorganizing market parameters Search risk2. Focus on the big picture Planning Risk (Future prospectus)3. Reach beyond existing demand Scale Risk4. Get the sequence of strategy right Business model risk Execution principles1. Overcome hurdles Organizational risk2. Build execution into strategy Management risk
  32. 32. Summary• The chapter gives you an idea of what is Blue ocean• How the blue ocean can be created successfully• Cirque introduced a new strategy, eliminating certain factors which are were a hindrance to rapid growth and giving the circus show a new concept
  33. 33. End of Chapter 1Creating Blue Oceans
  34. 34. “Like” us on Facebook:  p // /http://www.facebook.com/welearnindia “Follow” us on Twitter:http://twitter.com/WeLearnIndiahttp://twitter com/WeLearnIndiaWatch informative videos on Youtube: http://www.youtube.com/WelingkarDLP

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