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Blue ocean strategy

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Blue ocean strategy

  1. 1. Blue Ocean Strategy Special Report by: Rocky Gabatin SPENTREP – S09
  2. 2. Blue Ocean Strategy Salient Points “Competing in overcrowded industries is no way to sustain high performance.” There should be a creation of “uncontested market space”—a “Blue Ocean.”
  3. 3. Blue Ocean Strategy Salient Points Cirque du Soleil vs. Ringling Bros. Circus companies Cirque “reinvents the circus,” making the market competition irrelevant. Cirque pulled in “noncustomers” of the industry E.g. adults and corporate clients Cirque took off from the “Red Ocean.”
  4. 4. Blue Ocean Strategy Red Ocean Represents the industries in existence. It is the “known market space.” Industry boundaries are defined and accepted Competition is well understood by players Outperform the rivals to gain bigger market share Blue Ocean The “unknown market space.” Untapped, untainted by competition. Demand for a product is created rather than fought over by players in the industry.
  5. 5. Blue Ocean Strategy Red Ocean Compete in existing market space Defeat competitors Fight over 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 Blue Ocean Create uncontested market space Make the competition irrelevant Create and capture new demand Break the value-cost trade-off Align the whole system of firm’s activities in pursuit of differentiation and low cost
  6. 6. Blue Oceans
  7. 7. Effects of Blue Oceans • Rapid commoditization of goods and services • Price wars • Differentiating brands become harder
  8. 8. Towards Blue Ocean Strategy Blue oceans are not about technology innovation. While technology is involved in creating blue oceans, they can be created using existing technology. E.g. Ford’s assembly line resembles that of a meat-packing company. E.g. Computers are simplified and/or minimized.
  9. 9. Towards Blue Ocean Strategy Incumbents often create blue oceans – and usually within their core businesses. Blue oceans are created within, not beyond, red oceans of existing industries. Blue oceans are just right next to you. E.g. IBM and Compaq, AMC.
  10. 10. Towards Blue Ocean Strategy Company and industry are the wrong units of analysis. There is no perpetually excellent industry. Relative attractiveness is driven largely by the creation of blue oceans from within them.
  11. 11. Towards Blue Ocean Strategy Creating blue oceans builds brands. Companies are remembered because of the blue oceans they created, and this transcends time. E.g. Ford is still a well-known brand today.
  12. 12. Reference: Kim, W. C. & Mauborgne, R. (2004). Blue Ocean Strategy. Harvard Business Review, Oct. 2004. Harvard Press

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