This document summarizes key concepts from the book "Blue Ocean Strategy" by W. Chan Kim and Renée Mauborgne. It discusses how Cirque du Soleil created a blue ocean by reinventing the circus industry instead of competing in the declining red ocean circus market. Blue oceans represent uncontested market space with demand created, rather than fought over. The document contrasts red ocean strategy of competing over existing demand with blue ocean strategy of creating new demand and making competition irrelevant. It provides examples of companies that successfully created blue oceans like Ford, Apple, and Cirque du Soleil.

1. PRESENTED BY : NISHANT NAGDA
UNIVERSAL BUSINESS SCHOOL

2. BLUE OCEAN
STRATEGY
BY W. CHAN KIM & RENÉE MAUBORGNE
How to Create Uncontested Market Space
and Make the Competition Irrelevant

3. Author and Article Information
 W. Chan Kim (chan.kim@insead.edu) is the Boston
Consulting Group Bruce D. Henderson Chair Professor of
Strategy and International Management at Insead in
Fontaine-Bleau, France.
 Renée Mauborgne (renee.mauborgne@insead.edu) is the
Insead Distinguished Fellow and professor of strategy and
management at Insead.
 This article is adapted from their forthcoming book, BLUE
OCEAN STRATEGY : HOW TO CREATE
UNCONTESTED MARKET SPACE AND MAKE THE
COMPETITION IRRELEVANT (Harvard Business School
Press, 2005)

4. BLUE OCEAN STRATEGY
Competing in overcrowded industries is no
way to sustain high performance. The real
opportunity is to create BLUE OCEANS of
uncontested market space

5. Cirque du Soleil
 Founded in 1984 by street performers
 Stages productions seen by 40 million people in 90
cities around the world
 Cirque du Soleil has achieved in 20 years time
what Ringling Bros. And Barnum & Bailey – the
world’s leading circus – more than 100 years to
attain

6. Circus Industry Negatives
 When CDS was founded the circus industry was
in decline (and is still declining)
 Other forms of entertainment was available
(sports, TV, videos)
 Animal rights issues
 High priced Circus star performers
 Ringling and Barnum’s name a barrier to entry
(more than 200 years combined)

7. CdS’ Blue Ocean Strategy
 Revealing Tagline : “We Reinvent the Circus”
 CdS did not make money by competing within the
confines of an existing industry
 CDS did not steal from Ringling or Barnum
 CdS created uncontested market space that made
the competition irrelevant
 RESULT : CdS increased revenues by a factor of 22
over the last 10 years

8. BLUE OCEAN vs. RED OCEAN
 Red Oceans represent all the industries in
existence today – the known market space
 Red Oceans’ industries boundaries are defined
and accepted
 Red Ocean’s competitive rules are well
understood

9. What’s it like in a Red
Ocean?
 Companies try to outperform rivals in order to
grab greater share of existing demand
 Space gets more crowded
 Prospects for profits and growth reduced
 Products turn into commodities
 Increasing competition turns water bloody

10. What is the BLUE OCEAN?
 Blue oceans denote all industries NOT in
existence today
 The Unknown market space
 Untainted by competition
 In Blue Oceans, demand is created not fought over
 In Blue Oceans, growth is profitable and rapid

11. 2 ways to create Blue Oceans
 Companies can give rise to complete new
industries, example : Ebay with the online
auction industry
 Created WITHIN a Red Ocean when a company
alters the boundaries of an existing company,
example : Cirque du Soleil

12. Authors’ studies on Blue Oceans
 Cirque du Soleil is just one of more than 150 blue
ocean creations
 Studies encompass over 30 industries
 Data used stretches more than 100 years
 Analyzes companies that create blue oceans vs.
companies that are TRAPPED in red oceans

13. Insights on Blue Ocean Strategy
 There is a consistent pattern of strategic thinking
behind the creation of new markets and strategies
(called Blue Ocean Strategy)
 Blue Ocean strategies part with traditional
models focused on competing in existing market
space
 Managers’ failure to differentiate between blue
and red ocean strategy lies behind the difficulties
many companies encounter to break from the
competition

14. Once upon a time …
 The term blue oceans is NEW but it has always
been with us
 What industries were unknown 100 years ago?
Automobiles
Music recording
Aviation
Petrochemicals
Pharmaceuticals
Management Consulting

15. AUTOMOBILE
Key Blue Ocean
Creations
Blue Ocean
created by a new
entrant or
incumbent?
Driven by
technology or
value
pioneering?
At time of
creation,
industry
attractive or
unattractive?
Ford Model T New Entrant Value (mostly
existing
technologies)
Unattractive
GM’s “car for
every purse
and purpose”
Incumbent Value (some new
technologies)
Attractive
Japanese fuel-
efficient cars
Incumbent Value (some new
technologies)
Unattractive
Chrysler
minivan
Incumbent Value (mostly
existing
technologies)
Unattractive

16. COMPUTERS
Key Blue Ocean
Creations
Blue Ocean
created by a new
entrant or
incumbent?
Driven by
technology or
value
pioneering?
At time of
creation,
industry
attractive or
unattractive?
CTR tabulating
machine (CTR
is now IBM)
Incumbent Value (some new
technologies)
Unattractive
Apple personal
Computer
New Entrant Value (mostly
existing
technologies)
Unattractive
Compaq PC
Servers
Incumbent Value (mostly
existing
technologies)
Nonexistent
Dell built-to-
order
computers
New Entrant Value (mostly
existing
technologies)
Unattractive

17. MOVIE THEATERS
Key Blue Ocean
Creations
Blue Ocean
created by a new
entrant or
incumbent?
Driven by
technology or
value
pioneering?
At time of
creation,
industry
attractive or
unattractive?
Nickelodeon New Entrant Value (some new
technologies)
Nonexistent
Palace
Theaters
Incumbent Value (mostly
existing
technologies)
Attractive
AMC multiplex Incumbent Value (mostly
existing
technologies)
Unattractive
AMC megaplex Incumbent Value (mostly
existing
technologies)
Unattractive

18. The Paradox of Strategy
 In a study of 108 companies
86% of new ventures were line extensions or
incremental improvements to existing industries
ONLY 14% were aimed at creating new markets
or strategies
 Line extensions provided 62% of total revenues but
ONLY 39% of TOTAL PROFITS
 In contrast, on the 14% invested in creating new
markets it delivered 38% of the total revenues BUT
it delivered 61% of TOTAL PROFITS!!!

19. Why the imbalance?
 Corporate strategy is heavy influenced by its roots
in military strategy
 The language of strategy is imbued with military
references like “officers”, “headquarters”, “troops”,
“front lines”
 The language is the that of a red ocean strategy
 The language is about confronting the enemy and
driving him off a battlefield of limited territory

20. What focusing on the red
ocean means
 It means accepting the key constraints of war
Limited terrain
The need to beat an enemy to succeed
 Denying the distinctive strength of the business
world – the capacity to create new market space
that is uncontested

21. Competition Matters but …
 It ignores two very IMPORTANT and FAR
MORE LUCRATIVE aspects of strategy :
To find and develop markets where there is
little or no competition (blue oceans)
To exploit and protect blue oceans

22. BLUE OCEAN FINDINGS
 Blue Oceans are not about technology innovation
 Incumbents often create blue oceans – and usually
within their core businesses
 Company and industry are wrong units of
analysis
 Creating Blue Oceans builds brands

23. Blue Oceans are not about
Technology Innovation
 Leading-edge technology is INVOLVED but not
the defining feature
 This is true EVEN with technology-intensive
industries
 Blue oceans are SELDOM the result of
technology innovation – the underlying
technology is often already in existence
 About linking technology to what buyers want
and/or simplifying the technology

24. Incumbents often create Blue Oceans and
usually within their core businesses
 GM, Chrysler, IBM and Compaq were the
incumbents when they created Blue Oceans
 Only Ford, Apple, Dell and Nickelodean were new
entrants in their industries
 This suggests that incumbents are not at a
disadvantage in creating new market spaces
 These blue oceans are within their core businesses.
 New markets are NOT necessarily distant waters

25. Company and Industry are
wrong units of analysis
 Traditional units of analysis, company and
industry have little explanatory power on how
and why blue oceans are created
 There is NO consistently excellent company
 Every company rises and falls over time
 There is no perpetually excellent industry
 Relative attractiveness of an industry is driven
largely by the creation of blue oceans WITHIN
them

26. What then is the most
appropriate unit of analysis?
 To explain blue oceans it must be the :
STRATEGIC MOVE – the set of managerial
actions and decisions involved in making a major
market-creating business offering
Example : Compaq is considered “unsuccessful”
because of its acquisition by HP in 2001 and
ceased to be a company. But this “move” led to
the creation of a multibillion-dollar market in
PC servers. This was key to it’s comeback in the
1990s.

27. Red Ocean vs. Blue Ocean
(a comparison of imperatives)
 Compete in existing
market space
 Beat the competition
 Exploit existing
demand
 Make the value/cost
trade-off
 Align the whole system
of company’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 company’s activities in
pursuit of differentiation
AND low cost

28. Red Ocean vs. Blue Ocean
(a comparison of wold views)
 Structuralist or
Environmental
Determinism
worldview
 Companies and
managers are at the
mercy of economic
forces greater than
themselves
 Reconstructionist
worldview
 Market boundaries and
industries can be
reconstructed by the
actions and beliefs of
industry players

29. The Simultaneous Pursuit of
Differentiation and Low Cost
 Blue Oceans are created in the region where a
company’s action affects BOTH its cost structure
and its value proposition to buyers
 Cost savings are made from eliminating and
reducing the factors an industry competes on
 Buyer value is lifted by creating elements the
industry NEVER OFFERED
 Over time, costs are reduced further as scale
economies kick in, due to the high sales volumes
that superior value generates