4. Accolades
• Over 2 million copies sold
Translated into over 41 foreign
languages – a world record
Taught as the major theory of strategy at
leading business schools
Gives insights to CEOs, Executives,
Heads of State and Prime Ministers
5. New Market Space
• Red oceans and blue oceans make up market
universe
• Red oceans: all industries in existence
= known market space
• Blue oceans: all industries not in existence
= unknown market space
6.
7. Red Oceans
• Red oceans refers to
–Industry boundaries defined and accepted
–Competitive rules of game known
–Companies try to outperform rivals;
cutthroat competition
–As market space gets crowded, prospects for
profit and growth reduced
–Products become commodities
–Red ocean strategy is a market-competing
strategy
8.
9. Blue Oceans
• Blue oceans refers to
– Undefined market space, demand creation,
opportunity for highly profitable growth
– Most are created from within red oceans by
expanding existing industry boundaries
– Rules of game waiting to be set
– Competition irrelevant
– Blue ocean strategy is a market-creating
strategy
10. The Rising Imperative of Creating Blue
Oceans
• Supply is exceeding demand in most industries
• Global competition is intensifying
• Problems:
– Accelerated commodization of products and services
– Increasing price wars
– Shrinking profit margins
• Red oceans becoming bloodier, need to be
concerned with creating blue oceans
11. Two worlds …
Red Ocean
Compete in
crowded
markets
Blue Ocean
Create and
capture new
market space
12. The Continuing Creation of Blue Oceans
• Blue oceans have been around for some time; a
feature of business life
• Industries never stand still, constantly evolving
• Significant expansion of blue oceans over years
• So why the focus on red ocean strategy?
– Corporate strategy influenced by military strategy
– Need to create new market space that is uncontested
14. From Company andIndustry
to Strategic Move
• Are there lasting visionary companies that
continuously outperform the market and create blue
oceans?
• Found success of these model companies was a
result of industry sector performance, not companies
themselves
• Strategic move used as unit of analysis (rather than
company or industry)
• Strategic move: the set of managerial actions and
decisions involved in making a major market- creating
business offering
15. Value Innovation: The
Cornerstone of Blue Ocean Strategy
• Creators of blue oceans
follow value innovation
• Value Innovation
– Equal emphasis on value
and innovation
– Defies value-cost trade-off
of competition-based
strategy
– Successful value
innovation:
•
•
•
Drives down costs while
driving up buyers’value
Uses a whole-system
approach
Follows reconstructionist
view
16. Red Ocean Vs. Blue Ocean
• Compete in existing
market space
• Beat the competition
• Exploit existing demand
• Make the value-cost
trade-off
• Align the whole system
of a firm’s activities
with its strategic choice
of differentiation or low
cost
•
•
•
•
• Create uncontested
market space
• Make the competition
irrelevant
• Create and capture new
demand
• Break the value-cost
trade-off
• Align the whole system of
a firm’s activities in
pursuit of differentiation
and low cost
17. Formulating and Executing
Blue Ocean Strategy
• Six Principles of Blue Ocean Strategy
– Reconstruct market boundaries
– Focus on the big picture, not the numbers
– Reach beyond existing demand
– Get the strategic sequence right
– Overcome key organizational hurdles
– Build execution into strategy
18. Take Aways
• Red ocean strategy is a market-competing
strategy, while blue ocean strategy is a
market-creating strategy
• As red oceans are becoming bloodier, we
need to create more blue oceans
• “The only way to beat the competition is to
stop trying to beat the competition!”
19. Points of view
•Business often look at the industry from a
structuralist (supply) point of view
•What if we looked at the industry from a
reconstructionist (demand) point of view?
–Market boundaries are not viewed as given, but
could be reconstructed to unlock new demand
20. Generic Strategies vs.
Value Innovation
High
Low
V1
C1
Cost
Quality
HighHigh
High
LowLow
Low
Quality
Cost
•
•
D
LC
V1
C1
Structuralist Reconstructionist
21. Four Steps of Visualizing
1. Visual
Awakening
2. Visual
Exploration
3. Visual
Strategy Fair
4. Visual
Communication
•Compare your
business with your
competitors’ by
drawing your “as is”
canvas
•See where your
strategy needs to
change
•Go into the field to
explore the six paths
to creating blue
oceans
•Observe the
distinctive advantages
of alternative products
and services
•See which factors
you should eliminate,
create or change
•Draw your “to be”
canvas based on
insights from field
observations
•Get feedback on
alternative strategy
canvases from
customers,
competitors’
customers, and non-
customers
•Use feedback to
build the best “to be”
future strategy
•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 close
gaps and actualize
the new strategy
22. Eliminate
What factors
should be
eliminated that the
industry has taken
for granted?
What factors
should be reduced
well below the
industry standard?
Reduce
Create
What factors should
be created that the
industry has never
offered?
Raise
What factors
should be raised
well beyond the
industry standard?
Four Actions to create a Blue Ocean
23. Four Actions Framework +
Eliminate/Reduce/Raise/Create Grid
Eliminate
Enological terminology and
distinctions
Aging qualities
Above-the-line marketing
Raise
Price versus budget wines
Retail Store involvement
Reduce
Wine complexity
Wine range
Create
Easy drinking
Ease of selection
The four actions framework offers an
technique that breaks the trade-off between
differentiation and low cost and to create a
new value curve. It answers the four key
questions of what industry takes for granted
and needs to be eliminated; what factors need
to be reduced below industry standards; what
factors need to be raised above industry
standards; and what should be created that
the industry has never offered.
The eliminate-reduce-raise-create grid pushes
companies not only to ask all four questions in
the four actions framework but also to act on all
four to create a new value curve. By driving
companies to fill in the grid with the actions of
eliminating, reducing, raising, and creating, the
grid provides four immediate benefits: it pushes
them to simultaneously pursue differentiation and
low costs; identifies companies who are only
raising and creating thereby raising costs; makes
it easier for managers to understand and comply;
and it drives companies to scrutinize every factor
the industry competes on.
A
New
Value
Curve
Reduce
Which factors should be
reduced well below
industry standards?
Create
Which factors should
be created that the
industry has never
offered?
Raise
Which factors should
be raised well above
the industry’s standard?
Eliminate
Which of the factors
that the industry
takes for granted
should be eliminated?
24. ERRC Grid Yellow Tail
The Case of yellow tail
Eliminate
Enological terminology & distractions
Aging qualities
Above-the-line marketing
Raise
Price versus budget wines
Retain store involvement
Reduce
Wine complexity
Wine Range
Vineyard prestige
Create
Easy drinking
Ease of selection
Fun & adventure
26. Yellow Tail
•
•
•
•
•
•
•
Only 2 types initially – Chardonnay and Shiraz
Fruity, soft on palette, sweet-ish – great for those who had not
drunk wine before
Same bottle for red and white – low logistics costs
Simple vibrant packaging – lower case letters/kangaroo
Un-intimidating
They were selling “The essence of a great land … Australia” – ie
they were not selling the wine
Australian clothing for the retail staff – they enthusiastically
promoted a wine they could understand.
27. Value Innovation of [yellow tail]
Utility proposition
(customers, distributors and
retailers)
•Creating of a social drink that is accessible to
anyone
•Easy drinking, ease of selection, sense of fun and
adventure
•Limit number of SKUs
•Price to move at volume
Price proposition •Targeted at the mass of customers
•Priced against the alternative (6-pack)
Cost structure
•Elimination of working capital tied up in aging wines
•Fast product turnover
29. Results
No 1 imported wine (outsells France and Italy)•
• Fastest growing imported wine in the history of the USA
industry
– New consumers of wine
– Jug drinkers trade up
– Premium wine drinkers trade down
• Industry criticizes them mercilessly at first
Now wine press blurb gives it a “best buy” for
value; winning wine awards.
30. The Case of Cirque du Soleil
• Cirque du Soleil achieved rapid growth in a
declining industry with low profit potential
• Cirque du Soleil created uncontested new market
space that made the competition irrelevant
• If you don’t know them you can see some at
• http://www.youtube.com/watch?v=M4lAPI5BAuk
31. Example: Cirque du Soleil
• Instead of simply trying to outpace the
competition, Cirque du Soleil offered people both
the fun and thrill of the circus and the intellectual
sophistication of the theater
• Because of this, Cirque du Soleil appealed to both
circus customers and noncustomers
32. Example: Cirque du Soleil
• Each show, like a theater production, had its own
unique theme and storyline
• This allowed customers to return to the show
more frequently
• They also did away with the traditional high-
priced concessions and vendors thereby cutting
costs
33. Example: Cirque du Soleil
• Cirque du Soleil effectively combined the best of
both the circus and the theater while eliminating
everything else
• This allowed them to achieve both differentiation
and low cost
36. Key Takeaways
•
•
• Three tiers of non-customers:
– 1: buyers who purchase your industry offerings out of necessity; will
jump ship if given an opportunity.
– 2: buyers who purchase alternative offerings that serve the same
function
– 3: people who don’t consume even the alternatives to your offerings
• Non-customer demand is unlocked by providing
new buyer utilities, at a price that attracts a mass
of buyers, given target costs.
• Buyers could be not only end-users, but also other
participants in a value chain (e.g. distributors)
37.
38.
39. Purple Ocean Strategy
• Purple Ocean Strategy Just as Blue Ocean
Strategy states that a Red ocean Strategy
(Competitive Strategy) does not guarantee
success for the firm
• Purple Ocean strategy also claims that Blue
Ocean Strategy cannot guarantee the business
success in the long run since the Blue Ocean
strategy will finally turn Red.
40. Purple Ocean strategy
• The Purple Ocean strategy believes that in
today’s business world organizations require
both innovative ideas as well as a series of
strategies to compete with rivalry and remain
functional in the long term.
• Consequently, the name Purple Ocean
strategy was initially adopted following the
secondary colour generated by combining red
and blue colours.
41.
42.
43. Green Ocean Strategy
• Green Ocean Strategy is not about greening or
saving the environment.
• Discipline of strategy that concentrates on
how to maximize both fixed, internal and
human resources.
• Instead of copying or benchmarking against
the competition, the focus is to be more
realistic in relation to what the business can
actually commit or deliver.
44.
45. Green Ocean Strategy
• Using the analogy of beach and ocean, before
one reaches the blue part of the ocean, there
is the green.
• So it makes more sense that if a business can
stay within the Green Ocean, where the water
is clearer and nearer the shore, then this
would be less risky, more practical, and
eminently more desirable.
46.
47.
48. Conclusion
• While traditional competition-based
strategies (red ocean strategies) are
necessary, they are not sufficient to sustain
high performance.
• Companies need to go beyond competing to
seize new profit and growth opportunities.
