This document discusses the concept of blue ocean strategy, which involves creating new market space rather than competing in existing or "red ocean" markets. It explains that blue oceans are defined by untapped market demand, while red oceans involve competition over existing demand. The document outlines principles for formulating a blue ocean strategy, including reconstructing market boundaries, focusing on the big picture rather than numbers, and getting the strategic sequence right. Tools for blue ocean strategy creation are presented, such as the strategy canvas for mapping the current industry state and a company's strategic moves, and the four actions framework for eliminating, reducing, raising, and creating strategic factors. Characteristics of effective blue ocean strategies and risks to avoid with red ocean thinking are also summarized

1. BLUE OCEAN STRATEGY
How to Create Uncontested
Market Space and Make the
Competition Irrelevant
Made by Mrs. Kavita Yogesh Bansal

2. Creating Blue Oceans
New Market Space
The universe is composed of two sorts of
oceans- Red Oceans and Blue Oceans.
Red Oceans-All the industries in existence
today.
Blue Oceans-All the industries not in
existence today i.e. unknown market
space

3. Blue Oceans are defined by untapped
market space, demand creation, and the
opportunity for highly profitable growth.
In red oceans industry boundaries are
defined and accepted, and the competitive
rules of the game are known.
In blue oceans, competition is irrelevant
because the rules of the game are waiting
to be set.

4. The Continuing Creation of
Blue Oceans
Although the term blue oceans is new, their
existence is not.
Companies which never existed 50 years
back are on zoom today.
Similarly, companies which are not in
existence today may exist after a few
years & we should think about those.

5. The Impact of Creating
Blue Oceans
The profit and growth consequences of
creating blue oceans.
Business launch 86% 14%
Revenue Impact 62% 38%
Profit Impact 39% 61%
Launches within red oceans Launches for creating blue oceans

6. From Company & Industry to
Strategic Move
The study shows that the strategic move,
and not the company or the industry, is the
right unit of analysis for explaining the
creation of blue oceans and sustained
high performance.
A strategic move is the set of managerial
actions and decisions involved in making
a major market creating business offering.

7. Value Innovation: The cornerstone
of Blue Ocean strategy
Value innovation places equal emphasis
on value and innovation. Value without
innovation tends to focus on value
creation on an incremental scale,
something that improves value but is not
sufficient to make you stand out in the
market place.

8. Innovation without value tends to be
technology-driven, market pioneering, or
futuristic, often shooting beyond what
buyers are ready to accept and pay for.
Value innovation occurs only when
companies align innovation with utility,
price, and cost positions.
People who seek to create blue oceans
pursue differentiation and low cost
simultaneously.

9. Red Ocean Strategy Blue Ocean Strategy
Compete in existing Create uncontested
market space. market space.
Exploit existing demand. Create and capture new
demand.
Make the value-cost Break the value-cost
trade-off. trade-off.
Align the whole system Align the whole system
of a firm’s activities with of a firm’s activities in
its strategic choice of pursuit of differentiation
differentiation or low and low cost.
cost.

10. The Six Principles of Blue
Ocean Strategy

11. Formulation Principles Risk factors each principle
attenuates
Reconstruct market Reduces search risk
boundaries
Focus on the big picture, not Reduces planning risk
the numbers
Reach beyond existing Reduces scale risk
demand
Reduces business model
Get the strategic sequence risk
right
Execution Principles Risk factors each principle
attenuates
Overcome key Reduces organizational risk
organizational hurdles
Build execution into strategy Reduces management risk

12. Analytical Tools and
Frameworks
Effective blue ocean strategy should be
about risk minimization and not risk taking.

13. The Strategy Canvas
The strategy canvas is both a diagnostic
and an action framework for building a
compelling blue ocean strategy.
First it captures the current state of play in
the known market space.
This allows you to understand where the
competition is currently investing, the
factors the industry currently competes on
in products, service, & delivery, & what
customers receive from the existing
competitive offerings in the market.

14. The Four Actions Framework

15. Reduce
Which factors should
be reduced well
below the industry’s standard?
Eliminate Create
Which of the factors that A new Which factors should be
the industry takes for value curve created that the
granted should be industry has
eliminated? never offered?
Raise
Which factors should be raised
well above the
industry’s standard?

16. The Eliminate-Reduce-Raise-
Create Grid
Eg. [yellow tail]

17. Eliminate Raise
Enological terminology Price versus budget
and wines
distinctions Retail store
Aging qualities involvement
Above the line
marketing
Reduce Create
Wine complexity Easy drinking
Wine range Ease of selection
Vineyard prestige Fun and adventure

18. Three Characteristics of a
Good Strategy
1. Focus: Every great strategy has focus,
and a company’s strategic profile, or
value curve, should clearly show it.

19. 2. Divergence: When a company’s strategy
is
for
me
d
rea
ctiv
ely
as
it

20. 3. Compelling tagline: A good strategy has
a clear-cut and compelling tagline.
Eg. Tagline of SouthWest Airlines
“The speed of a plane at the price of a car-
whenever you need it.”

21. Some factors showing a company
caught in the Red Ocean
Overdelivery without payback
An Incoherent Strategy
Strategic Contradictions
An internally driven company

22. Formulating Blue Ocean
Strategy

23. Reconstruct Market
Boundaries

24. Companies trapped in red oceans
tend to do the following:
Define their industry similarly and focus on being
the best within it.
Look at their industries through the lens of
generally accepted strategic groups (such as
luxury automobiles, economy cars, and family
vehicles), and strive to stand out in the strategic
group they play in.
Focus on the same buyer group, be it the
purchaser (as in office equipment industry), the
user ( as in clothing industry), or the influencer
(as in pharmaceutical industry).

25. Define the scope of the products and
services offered by their industry similarly.
Accept their industry’s functional or
emotional orientation.
Focus on the same point in time-and often
on current competitive threats-in
formulating strategy.

26. Six Paths Framework
(Pattern for Creating Blue
Ocean Strategy)

27. Path 1: Look Across Alternative Industries.
Path 2: Look Across Strategic Groups
Within Industries.
Path 3: Look Across the Chain of Buyers.
Path 4: Look Across Complementary
Product and Service Offerings.
Path 5: Look Across Functional or Emotional
Appeal to Buyers.
Path 6: Look Across Time.

28. Conceiving New Market
Space

29. From Head to Head Competition to
Blue Ocean Creation

30. Head-to-Head Blue Ocean
Competition Creation
Industry Focuses on rivals Look across
within its industry alternative
industries
Strategic Group Focuses on Looks across
competitive position strategic groups
within strategic within industry
group
Buyer Group Focuses on better Redefines the
serving the buyer industry buyer
group group

31. Head-to-Head Blue Ocean
Competition Creation
Scope of product/ Focuses on Looks across to
service offering maximizing the complementary
value of product & product and service
service offerings offerings
within the bounds
of its industry
Functional- Focuses on Rethinks the feo of
emotional improving price its industry
orientation (feo) performance within
the feo of its
industry
Time Focuses on Participates in
adapting to external shaping external
trends as they trends over time
occur

32. Focus on the Big Picture, Not
the Numbers

33. Drawing Your Strategy
Canvas
The Four Steps of
Visualizing Strategy

34. 1.Visual 2. Visual 3. Visual 4. Visual
Awakening Exploration Strategy Fair Communication
Compare your Go into the Draw your “to Distribute your
business with field to explore be” strategy before-and-after
your the six paths to canvas based strategic profiles
competitors’ by creating blue on insights from on one page for
drawing your oceans. field easy
”as is” strategy Observe the observations. comparison
canvas. distinctive Get feedback
advantages of on alternative Support only
See where alternative strategy those projects
your strategy products and canvases from and operational
needs to services customers, moves that
change See which competitors’ allow your
factors you customers, & company to
should non customers. close the gaps
eliminate, create Use feedback to actualize the
or change to build the best new strategy.
“to be” future
strategy.

35. Reach Beyond Existing Demand
The three tiers of Noncustomers
First tier Third
Second
Your market tier
tier
First tier-”soon to be” noncustomers who are
on the edge, waiting to jump ship.
Second tier-’’Refusing’’ noncustomers who
consciously choose against your market
Third tier: ‘’Unexplored’’ noncustomers who are
in markets distant from yours

36. Get the Strategic Sequence
Right

37. Buyer utility
Is there exceptional buyer utility No-rethink
in your business idea?
Yes
Price
Is your price easily accessible to
No-rethink
the mass of buyers?
Yes
Cost
Can you attain your cost target No-Rethink
to profit at your strategic price?
Yes
Adoption
What are the adoption hurdles in
actualizing your business idea? No-Rethink
Are you addresing them up front?
Yes
A commercially viable
Blue ocean idea

38. Testing for Exceptional Utility
The Buyer Utility Map

39. The Six Stages of the Buyer Experience Cycle
1. 2. 3. 4. 5. 6.
Purchase Delivery Use Suplemnts mainte Disposal
nance
Customer
Productivity
Simplicity
Convenience
Risk
Fun & Image
Environmental
friendliness

40. The Buyer Experience Cycle

41. Purchase Delivery Use
How long does it How long does Does the product require
take to find the it take to get the training or expert
product you product assistance?
need? delivered?
Is the product easy to store
Is the place of How difficult is it when not in use?
purchase to unpack and
attractive & install the new How effective are the
accessible product? product’s features and
functions?
How secure is Do buyers have
the transaction to arrange Does the product or
environment? delivery service deliver far more
themselves? If power or options than
yes, how costly
How rapidly can required by the average
and difficult is
you make a user? Is it overcharged
this?
purchase? with bells and whistles?

42. Supplements Maintenance Disposal
Do you need Does the Does use of the
other products product require product create
& services to external waste items?
make this maintenance?
product work? How easy is it
How easy is it to dispose of
If so, how to maintain & the product?
costly are they? upgrade the
product? Are there legal
How much time or
do they take? How costly is environmental
maintenance? issues in
disposing of the
How much pain
do they cause? product safely?
How easy are How costly is
they to obtain? disposal?

43. Uncovering the Blocks to
Buyer Utility

44. Purchase Delivery Use Suppleme Maintena Disposal
nts nce
Customer Productivity: in which stages are the biggest blocks to customer
productivity?
Simplicity: in which stages are the biggest blocks to simplicity?
Convenience: In which stages are the biggest blocks to convenience?
Risk: In which stages are the biggest blocks to reducing risks?
Fun & Image: In which stages are the biggest blocks to fun & image?
Environmental friendliness: In which stages are the biggest blocks to
environmental friendliness?

45. From Exceptional Utility to Strategic
Planning
Step 1: Identify the Price corridor of the
Mass
Step 2: Specify a Level Within the Price
Corridor

46. From Strategic Pricing to
Target Costing
The Profit Model of Blue
Ocean Strategy

47. The Strategic Price
The Target Profit
The Target Cost
Streamlining & Cost innovations Partnering
Pricing Innovations

48. Adoption Of Blue Ocean Idea
Before moving further and investing in the
new idea, the company must first
overcome such fears by educating the
following people-
Employees
Business Partners
The General Public

49. Executing Blue Ocean
Strategy

50. Overcome Key
Organizational Hurdles
The Four Organizational
Hurdles to Strategy Execution

51. Cognitive Hurdle
An organization
wedded to the status
quo
Political Hurdle
Resource Hurdle Opposition from
Limited resources powerful vested
interests
Motivational Hurdle
Unmotivated Staff

52. Building Execution into Strategy
A company is not only Top Management,
nor is it only middle management. A
company is everyone from the top to the
front lines.
The company must create a culture of
trust & commitment that motivates people
to execute the agreed strategy.

53. The power of fair process
How Fair Process Affects
People’s Attitudes and
Behavior

54. Fair Process
Strategy Engagement
Formulation Explanation
Process Expectation clarity
Trust and
Attitudes Commitment
“I feel my opinion counts”
Voluntary Co-operation
“I’ll go beyond the call
Behavior of duty”
Exceeds expectations
Self- Initiated
Strategy
execution

55. The Three E Principles of Fair
Process
There are three mutually reinforcing
elements that define fair process-
1. Engagement
2. Explanation
3. Clarity of Expectation

56. The execution consequences of the presence and absence
Of fair process in strategy making
Voluntary
Intellectual &
Trust & Cooperation in
Fair Process Emotional
Commitment Strategy
Recognition
execution
Intellectual & Refusal to
Violation of Fair Distrust &
Emotional Execute
Process Resentment
Indignation Strategy

57. Imitation Barriers to Blue Ocean
Strategy
Value innovation does not make sense to
a company’s conventional logic.
Blue ocean strategy may conflict with
other companies’ brand image.
Natural monopoly: The market often
cannot support a second player.
Patents or legal permits block imitation.
Network externalities discourage imitation.

58. Imitation Barriers to Blue Ocean
Strategy contd…
High volume leads to rapid cost
advantage for the value innovator,
discouraging followers from entering the
market.
Imitation often requires significant political,
operational, & cultural changes.
Companies that value-innovate earn
brand buzz & a loyal customer following
that tends to shun imitators.

59. Blue Ocean Strategy
Written by
W.Chan Kim
Renee Mauborgne