Blue ocean strategy

1. Blue Ocean Strategy
Presented by: Warda Ikram
Izaz Ali
M. Zeeshan Khattak
Behram Khan

2. Introduction
Business universe consists of:
1. Red Oceans
2. Blue Oceans

3. RED OCEAN
• All industries in existence today
• Known market place
• Competition
• Companies try to gain a bigger market share
• Crowded industries, profits and growth
reduces

4. BLUE OCEAN
• All industries not in existence
• Unknown market place
• No competition
• Demand is created, not fought over
• Two ways to create blue oceans:
1. Completely new industries
2. Created from with a red ocean

5. Red Oceans are greatly influenced by Military
Strategy
• Attacking
• Competing
• Winning
• Capturing

6. Toward blue ocean strategy:
Blue oceans are not about technology innovation.
Although technology is sometime involves in
creation of blue oceans strategies but it is not key
feature of technology.
Advanced Technology is used in those industries,
where it is intensive.
Exhibit shows that among three representative
industries blue oceans seldom result technology
innovation b/c they have certain technology
already.

7. Cont’d
• Ford’s revolutionary assembly line can be
traced back to meat packing in USA.
• Similarly, in computer industries blue oceans
did not only come from innovation in
technology but by technology which is valued
by buyers.
Michael Ford

8. Incumbents create Blue oceans
• The established old player usually create blue
oceans in their core businesses.
• For instance GM Japanese automaker &
Chrysler were establish player during creation
of blue ocean.
• In cinema industry place theaters and ACM
create blue oceans.
• Ford, apple & dell (new entrants)
• Nickelodeon (established player)

9. Cont’d
• Two useful things for incumbents..
1. No disadvantage in creating new market.
2. Incumbents usually use blue oceans their
core businesses.

10. Blue Ocean Strategy
New
entrant 4
incumbent
9
existing
technology
new
technology
Driven by new/existing
technology
 Both
existing/new
Technology
attractive or unattractive
industry
attractive
unattractive
non existent

11. Company & industry are wrong units
of analysis
• Traditional units of strategic analysis(company &
industry) have little explanatory power when it
comes to analyzing how & why blue oceans are
created.
• There is no consistently excellent company b/c
same company can be brilliant at one & wrong at
other time.
• Likewise there is no excellent industry. relative
attractiveness is driven by creation of blue
oceans.

12. Cont’d
• The most appropriate unit of analysis for explaining the
creation of blue oceans is the strategic move.
• Strategic move is the set of managerial actions and
decisions involved in making a major market creating
business offering. for example
• Compaq. People considered it to unsuccessful b/c in
2001 It was acquired by HP & cease to be a company.
• But Compaq does not invalidate the smart strategic
move because it create multibillion dollar market in PC
servers.

13. Creating blue oceans builds brands
• Blue oceans strategy is so powerful that BO
strategy move create brand equity which
exists for decades.
• Henry ford‘s assembly line in 1908, but
company’s brand still benefits form that Blue
oceans move.
• IBM is also regarded as US institution for its
blue oceans strategy it created in computer.
e.g 360 series

14. Cont’d
• The findings from blue oceans strategy
encouraging the executives of large established
corporations that are victims of market space
creation.
• Large R&D is not key to create new market space
but the key is making right strategic move.
• Any company that understand what drives a good
strategic move will be well placed to create
multiple blue oceans over time.
The End…………

17. Cirque du soleil – differentiation and
Low cost

18. Whole system approach –
utility and price, cost
structure.
Re-constructionist view vs.
traditional competitive
strategy

20. Barriers to Imitation
• Creating a blue ocean strategy is not a static
achievement but a dynamic process
• As the company and early imitators succeed
and expand the blue ocean more companies
eventually jump in.

21. Barriers to Imitation
A blue ocean brings barriers to imitation; some
being operation and others cognitive.
• A value innovative move does not make sense
based on conventional strategic logic
– EX: CNN
• Brand image conflict prevents companies from
imitating a blue ocean strategy.
– EX: The Body Shop

22. Barriers To Imitation
• Natural monopoly blocks imitation when the
size of a market cannot support another
player
– EX: Megaplex in Brussels
• Patents or legal permits block imitation

23. Barriers to Imitation
• Cost Advantages: High volume by value
innovation
– Ex: Apple ‘i’ products helped discourage imitation for
awhile
• Network externalities: the more customers, the
more attractive a company looks
– Ex: ebay – many buyers/sellers; hard to get them to
move to a potential imitator

24. Barriers to Imitation
• Politics and Culture: Imitation often requires
companies to make changes to existing business
practices and culture
– Ex: Southwest (offers speed of travel with cost/flex. of
driving)
– Would mean major revisions in routing, training,
marketing, and pricing
• Brand Buzz: High leap in value leads to loyal
followers
– Ex: Apple products (“I’m a Mac” campaign)