Blue ocean strategy aims to create new, uncontested market space by pursuing differentiation and low costs. It reconstructs market boundaries to make competition irrelevant. Rather than competing based on factors like price or quality, blue ocean strategy creates new demand by delivering value in new ways. It focuses on creating new markets for non-customers rather than fighting over existing customers in established industries.

1. ABOUT
RED OCEAN
Compete in existing market
BLUE OCEAN
Create new market
Blue Ocean strategy pursues both differentiation and low cost to open new market space and create new
demand. It aims to create and capture uncontested market space, and as a result make the competition
irrelevant. It is based on the view that market boundaries and industry structure are not a given and can be
reconstructed by the actions and beliefs of industry players.

2. Source
of
competitive
advantage
Markets where business competes
Cost
Leadership
Cost
Focus
Differentiation
Leadership
Differentiation
Focus
BROAD NARROW
COSTS
DIFFERENTIATIO
N
High
Low
High
Low RELATIVE VALUE
BUYER
VALUE
PORTER’S COMPETITIVE ADVANTAGE BLUE OCEAN STRATEGY
Competitive advantage within an industry can be reached by pursuing either
“differentiation” or “cost leadership”, and is created through aggressive
marketing. Innovative design, or product/service quality. The focus is on
existing market and/or industry.
Blue ocean strategy turns strategic management on its head by replacing
“competitive advantage” with “value innovation” as the primary goal.
Firms must create consumer demand and exploit untapped markets. The
Focus is on creating new markets.

3. PURCHASE DELIVERY SUPPLEMENTS
USE MAINTENANCE DISPOSAL
Environment
Friendliness
Customer
Productivity
Simplicity
Convenience
Risk
Fun and Image
BUYER UTILITY MAP Current Industry Focus Blue Ocean Offering

4. Current Market
Customers of your industry
TIER-1 “Soon-to-be”
“Soon-to-be” noncustomers who are on the edge
of your market waiting to jump ship
TIER-2 “Refusing”
“Refusing” noncustomers who consciously
chose against your market
TIER-3 “Unexplored”
“Unexplored” noncustomers who are in
markets distant from yours.
STEP 3: REACH BEYOND
EXISTING CUSTOMERS
CURRENT MARKET
TIER 1
TIER 2
TIER 3

5. The process is designed to change the mindset,
understanding and move beyond the current limitations
of the existing industry and identify greater value
improvement and then progressively move to value
innovation by identifying non-customers.
STEP 4: CLASSIFY
PRODUCTS / SERVICES
As-Is Portfolio To-Be Portfolio
Pioneer Value
Innovation
Migrator Value
Improvement
Settler Value
Imitation