Blue Ocean Strategy2

8/7/2019 Blue Ocean Strategy2

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Blue Ocean StrategyBlue Ocean Strategy

Prof.Dr.Aung Tun ThetProf.Dr.Aung Tun Thet


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Lifes most urgent question is:

What are you doing for others?


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You have two hands.

One is for helping yourself.

The other is for helping others.


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We do no great things,

Only small things with great love.


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Introduction


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Competing in overcrowdedindustries no way to sustain high

performance


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Create blue oceans ofuncontested market space


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Strategy FormulationExternalAppraisal

InternalAppraisal

Threats/Opportunities

Strengths/Weaknesses

Key successfactors

Distinctivecompetencies

Strategy

creation

CSRManagerial

valuesStrategychoice

implementation


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Forms of Strategy

Intendedstrategy

Deliberatestrategy

Realized

strategy

Unrealized

strategy

Emergent

strategy


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Blue and Red Oceans


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100 years ago

Automobiles

Music recorders

Aviation

Pharmaceutical Management consultancy


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30 years ago

Cellular phones

Biotechnology

Express package delivery

Snowboards Coffee bars

Home videos


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20 years from now

Blue ocean the engine of growth

Red oceans establishedmarket spaces shrinking


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Business Universe

BlueOceans

RedOceans


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RedOceans

All industries in existence Known market space

Industry boundaries defined andaccepted Competitive rules of gameunderstood

Try to outperform rivals Overcrowded Prospects for growth and profitsreduced


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BlueOceans

Industries not inexistence Unknown market space

Space untainted by competition Demand created not fought over Opportunity for growth and profitsreduced


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Two ways to create Blue Oceans

Completely new industry

eBay Created from within a Red

Ocean alters boundaries

of existing industry Cirque Soleil break

through barrier separating

circus and theater


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Blue Ocean New term

Concept not new


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The Paradox of Strategy


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Red Oceans Common

86% of new ventures line extensions

14% create new markets or industries


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Contrasts

62

39 38

61

0

10

20

30

40

50

60

70

%

Line extensions New markets and

industries

Revenues Profits


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Imbalance Corporate strategy influenced by military

strategy Strategy about competition

Confronting an opponent Driving out of territory


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Red Ocean Accepting key constraining factors of war

Limited terrain

Need to beat an enemy to succeed

Denying the distinctive strength of thebusiness world capacity to create newuncontested market space


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Red Ocean Japanese competition in the 70s and 80s

Competition the core of corporate successor failure

Competitive advantage companiesoutperform rivals and capture greatermarket shares


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Focus on competition Ignore two important aspects

1. Find and develop markets where there islittle or no competition blue oceans

2. Exploit and protect blue oceans


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Blue Ocean Strategy

Doing business where there is no

competitor Creating new land not dividing up

existing land


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Towards Blue Ocean

Strategy


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Strategic logic of Blue Ocean

Strategy

Blue oceans not about technological innovations

Incumbents often create blue oceans andusually within their core business

Traditional units of strategic analysis company

and industry little explanatory power Creating blue oceans builds brands


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Blue Ocean Strategic Thinking

Away from traditionalmodel

Understanding the

difference Red and BlueOceans


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Three Circle

Strategic Thinking


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Executives Understand the importance of competitive

advantage to grow and be profitable over thelong term

Confused by language of strategy

Bogged down with technical details of analyticaltools


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Three Circles Visual representation of strategy

Simple tool


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Competitors

offerings

Customers

needs

Companys

offerings

EWhiteSpace(BLUE

OCEAN)

APoints

of parity

BOur points

of difference

CTheir pointsof difference

G

D

F


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Three Circles First Circle: What the most important customer

or customer segments want or need

Second Circle: How customers perceive thecompanys offerings

Overlap of first and second circles: How well

the companys offerings fulfill customers needs Third Circle: How customers perceive the

offerings of companys competitors


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Each area within the circles Strategically important

A, B, and C: Critical in building competitive advantage A: How big and sustainable are our advantages? Are

they based on distinctive capabilities?

B: Are we delivering effectively in the area of parity?

C: How can we counter our competitors advantages?


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Each area within the circles E: (White Space): Blue Ocean -

Opportunity for growth D, F and G: Value the company or its

competitors create that customers dontneed


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Defining Characteristics


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Red Ocean Versus Blue Ocean Strategy


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Red Ocean Versus Blue Ocean Strategy

Blue Ocean Strategy

Create uncontested market spaceMake the competition irrelevant

Create and capture new demandBreak value/cost trade-off

Align activities in pursuit of differentiati9onand low cost


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Conventional strategy Trade-off exists between value and cost

Companies create greater value forcustomers at higher costs, or

Reasonable value at lower costs Choice between value and low cost


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Blue Ocean Strategy Rejects conventional strategy

Successful companies pursue value andlow cost simultaneously


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Blue Ocean Strategy Fundamental change in strategic mind-set

Reconstructionist view

Not the environmental determinism or

structuralist view of Red Ocean Strategy


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BUYER VALUE

COSTS

blueocean


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The Simultaneous Pursuit ofDifferentiation and Low Cost

Blue ocean created in the region where a

companys actions favourably affect bothits cost structure and its value propositionto buyers


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Ford Model T End of 19th century automobile industry small

and unattractive 500 carmakers produce handmade luxury cars

Unpopular with public


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Ford Model T Industry boundaries fashionable customized

cars and horse-drawn carriages Unlocked enormous untapped demand

One colour black

Provided value at lower cost


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Circus Business

Long-term decline

Decreasing audience

Increasing costs

Alternative forms ofentertainment


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Cirque Soleil

Reinvented the circus

Did not compete withinthe confines of the

existing industry Did not steal from

competitors


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Cirque Soleil

Created uncontestedmarket space

Made competition

irrelevant Brought in a new group of

customers adults,

corporate clients


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Conclusion


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Red and Blue Oceans

Coexists Companies must understand strategic

logic of both types


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Red and Blue Oceans

Red Oceans dominates in theory andpractice

Need to create Blue Ocean intensifies

Better balance in strategic thinking


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Its impossible, says Reason

Its reckless, says Experience

Its painful, says Pride

Try! Says Dream


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Never laugh at anyone's

dreams.

People who don't have

dreams don't have much.

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Blue Ocean Strategy2