BLUE OCEAN STRATEGY
This new thinking makes it possible for innovative entrepreneurs to increase their chances for success and the extent of potential success. It includes:
• Insights about the innovative positioning of new ventures; and • Tools to make it possible.
To help you:
• Modify your business model, • Re-orient your product or service, • Change the borders of your target market, and • More effectively carry out your venture.
CUSTOMER ORIENTATION
• A distinctive aspect of Blue Ocean Strategy is that:
• instead of looking to serve existing prime customers in the existing market place,
- it is largely concerned with modifying a
product or service offering, and
- establishing new market space by targeting
dissatisfied customers and non-customers,
the potential customers for the new venture.
THE POTENTIAL IMPACT OF BLUE OCEAN
What interests us most about Blue Ocean is that it gives you a path to find and implement a winning formula for your business model:
• with improved understanding of the way that markets work; along with• methods of analysis, and tools for strategy implementation
• Its principal objective is to make it possible to reconfigure and implement a new business model in order:
• to leave a highly-contested market (a “Red Ocean” with blood in the water); and
• create new market space without effective competition (a “Blue Ocean”).
• The Blue Ocean approach makes use of a process called “value innovation” in which you:
• look at the elements of a product or service offering on which ventures in the industry compete, and
• determine elements that can be: – Eliminated, – Reduced, – Improved, and – Added
THE KEY TO BLUE OCEAN STRATEGY
RESEARCHING THE HISTORY OF“BLUE OCEAN CREATION”
• Data: 150 blue ocean creations, more than 30 industries, over 100 years (1880-2000)
• Hotel, cinema, retail, airline, energy, computer, broadcasting, home construction, automobile, steel manufacturing, chemicals, cosmetics, software, etc.
• Variables considered: industrial, organizational, strategic
Reference From : www.hbs.org
Business Launch
Revenue Impact
Profit Impact
Red OceansMarket-Competing Business Launches
Blue OceansMarket-Creating Business Launches
Companies Have Achieved Substantially Higher Returns from Investments in Blue Oceans
7
Red Ocean Versus Blue Ocean Strategy
Create uncontested market space
Blue Ocean StrategyRed Ocean Strategy
Compete in existing market space
Beat the competition
Exploit existing demand
Make the value-cost trade-off
Make the competition irrelevant
Create and capture new demand
Break the value-cost trade-off
Align the whole system of a firm’s activities with its strategic choice of
differentiation or low cost
Align the whole system of a firm’s activities with its strategic choice of
differentiation and low cost
Blue Ocean
Strategy
Value Innovation: The simultaneous pursuit of differentiation and low cost
Eliminate
Reduce
Raise
Create
Cost
Buyer Value
Value
Cost
Four Actions Framework for Apple
EliminateEliminate RaiseRaise
ReduceReduce CreateCreate
Difficulty in text messaging-use keyboard instead
•Carrying separate devices: phone, MP3, PDA
•Requirement to always hook up to PC
•Difficult user interface-make touch screen
• Device to download music directly
• Hold more songs
• Simple user interface, no user manual required
• Sleek design
• User interface & improve navigation
• Hold more music
• Applications-games, money management, news, etc.
• Wireless internet on phone
The Six Conventional Boundaries of Competition
To Creating Across
From Competing
Within
Industry
Strategic group
Buyer group
Scope of product or service
offeringFunctional-emotional
orientation of an industry
Time
Six Paths to Blue Ocean Strategy
6 PATHS: Allows Exploration Outside of Traditional Boundaries
Path 6 - TimeWhat trends have a high probability of impacting your industry, are
irreversible, and evolving in a clear trajectory? How will these trends impact your industry? Given this, how can you open up
unprecedented customer utility?Apple Music, Cisco Systems, CNN,
HBO’s “Sex and the City”
Path 6 - TimeWhat trends have a high probability of impacting your industry, are
irreversible, and evolving in a clear trajectory? How will these trends impact your industry? Given this, how can you open up
unprecedented customer utility?Apple Music, Cisco Systems, CNN,
HBO’s “Sex and the City”
Path 1 - IndustryWhat are the alternative industries to your industry?
Why do buyers trade across to them?NTT DoCoMo, Federal Express, Southwest Airlines, NetJets
Path 1 - IndustryWhat are the alternative industries to your industry?
Why do buyers trade across to them?NTT DoCoMo, Federal Express, Southwest Airlines, NetJets
Path 2 – Strategic GroupWhat are the strategic groups in your industry?
Why do buyers trade up for the higher group, and why do they trade down for the lower one?
Polo Ralph Lauren, Curves, Sony Walkman, Toyota Lexus
Path 2 – Strategic GroupWhat are the strategic groups in your industry?
Why do buyers trade up for the higher group, and why do they trade down for the lower one?
Polo Ralph Lauren, Curves, Sony Walkman, Toyota Lexus
Path 3 - Buyer GroupWhat is the chain of buyers in your industry?
Which buyer group does your industry typically focus on?If you shifted the buyer group of your industry,
how can you unlock new value?Novo Nordisk, Bloomberg Terminals, Canon Copiers, Philips
Alto
Path 3 - Buyer GroupWhat is the chain of buyers in your industry?
Which buyer group does your industry typically focus on?If you shifted the buyer group of your industry,
how can you unlock new value?Novo Nordisk, Bloomberg Terminals, Canon Copiers, Philips
Alto
Path 4 - Scope of product or service offeringWhat is the context in which your product or service is used?
What happens before, during, and after? Can you identify the pain points? How can you eliminate these pain points through a
complementary product or service offering?Borders and Barnes & Noble, Dyson Vacuum Cleaners, Kinépolis
Kiné-kids, Zenick Salick’s Cancer Centers
Path 4 - Scope of product or service offeringWhat is the context in which your product or service is used?
What happens before, during, and after? Can you identify the pain points? How can you eliminate these pain points through a
complementary product or service offering?Borders and Barnes & Noble, Dyson Vacuum Cleaners, Kinépolis
Kiné-kids, Zenick Salick’s Cancer Centers
Path 5 - Functional-emotional orientation of an industryDoes your industry focus on functionality or emotional appeal? If
you compete on emotional appeal, what elements can you strip out to make it functional? If you compete on functionality, what
elements can be added to make it more emotional?Starbucks, QB House, Direct Line Group, Pfizer’s Viagra
Path 5 - Functional-emotional orientation of an industryDoes your industry focus on functionality or emotional appeal? If
you compete on emotional appeal, what elements can you strip out to make it functional? If you compete on functionality, what
elements can be added to make it more emotional?Starbucks, QB House, Direct Line Group, Pfizer’s Viagra
Formulation Risks
Execution Risks
Formulation Principles
Execution Principles
Minimizing Risks & Maximizing Opportunities in Formulating and Executing Blue Ocean Strategy
Focus on the big picture, not the numbers
Search Risk
Reach beyond existing demand
Get the strategic sequence right
Overcome key organizational hurdles
Build execution into strategy
Reconstruct market boundaries
Planning Risk
Scale Risk
Business Model Risk
Organizational Risk
Management Risk
Purple Ocean Strategy
• Purple Ocean Strategy Just as Blue Ocean Strategy states that a Red ocean Strategy (Competitive Strategy) does not guarantee success for the firm
• Purple Ocean strategy also claims that Blue Ocean Strategy cannot guarantee the business success in the long run since the Blue Ocean strategy will finally turn Red.
Purple Ocean strategy
• The Purple Ocean strategy believes that in today’s business world organizations require both innovative ideas as well as a series of strategies to compete with rivalry and remain functional in the long term.
• Consequently, the name Purple Ocean strategy was initially adopted following the secondary colour generated by combining red and blue colours.