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Blue ocean strategy

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  • 1. Blue Ocean Strategy Blue Ocean Strategy is concerned with creating unique customer value by entering the business into uncontested/untapped space. On the basis of one research which was conducted in USA in 1880 to 2000 by the unique customer value activities of 150 companies (all kind of industries) Prof W. Cham Kim and Prof Renee Mauborgne developed the concept of ‘Blue Ocean Strategy’ in the Harvard Business Review that was published in 2005. According to them there are two type of different space into the market universe – Red Ocean and Blue Ocean. Due to overcrowded industries product and services became commodity and profit and share have been shrinking drastically day-by-day. Basically this kind of condition comes under the ‘Red Ocean Strategy’. Red Ocean Space represents all the industries in existence today. Boundaries are well defined. Rules of competitors’ game war also defined to all. Profit, revenue and share have been decreasing and all are fighting with each other to overcome their rivals in order to achieve greater share of existing demand. Blue Ocean Strategy/Space represents untapped, unknown and uncontested market space where competition is irrelevant as the rules of competitor’s game are waiting to be set. It creates new demand instead of exploiting it. There is an ample opportunity of growth which is important for both profit and share. Blue Ocean Strategy allows you to understand: • Where the competition is currently investing • The factors the industry currently competes on in product, service and delivery • What customers receive from existing competitive offerings on the market But the questions are that is there any systematic approach to create blue ocean strategy? For coming to the answer author has made ‘Action Framework’ for Blue Ocean StrategyBharti Bhutani www.managementexplorer.com Page 3
  • 2. Action Frame work of Airtel Telecommunication Eliminate Reduce • Poor training To CSRs • Charges Raise Create • Coverage • Payment through phone • Tariff Plan • DTH Services on Phone • Improve Network • Kiosk for cash payment of Post-paid connection • CSRs (Customer Support Representative) • International Roaming Six Principles of Blue Ocean Strategy FormulationBharti Bhutani www.managementexplorer.com Page 3
  • 3. 1. Reconstruction of market boundaries-: Reconstruction of market boundaries by Head to Head Strategy Head to Head Strategy Blue Ocean Strategy 1. Focus on rivals within industry 1. Looks across alternative industries 2. Focuses on competitive position within 2. Looks across strategic group within Strategic group industry 3. Focuses on better serving the buyer group 3. Redefines the industry buyer group 4. Focuses on maximizing the value of product 4. Looks across delighting products or services offerings within the bounds and services of industry 2. Focus on big picture, not the Number It can be possible by four steps of ‘Visualizing Strategy’ • Visual Awakening -: Compare your business with your competitors and see where your strategy need to change • Visual Exploration-: To explore the six paths to creating blue oceans, or the distinctive advantages of alternative products and services and see which eliminate or create or you can go with action frame work. • Visual Strategy Fair-: Draw your plan on where you want to be and how would be reach there. Take feedback on alternative strategy canvases from customers, competitor’s customers and non customers • Visual Communication-: Distribute your before-and-after strategic profiles on one page for easy comparison. Support only those projects and operational moves that allow your company to reduce gap for new strategy. 3. Reaching beyond existing demand-: Reach to noncustomer (Rural present of Airtel) 4. Getting the strategic sequence right-: Buyer utility Price Cost Adoption Implementation 5. Overcoming key organization hurdles-: Cognitive, Resource, Motivational and Political 6. Building implementation into strategy- Fair process of strategyBharti Bhutani www.managementexplorer.com Page 3