Blue Ocean Strategy

How to create
uncontested market space
and make the competition irrelevant
 About the Founders: Chan & Renee

W. Chan Kim
• The Boston Consulting Group
Bruce D. Henderson Chair
Professor of Strategy and
International Management

Renée Mauborgne
• The INSEAD Distinguished
Fellow and Professor of Strategy
and International Management
Two worlds …
Two worlds …
Red Ocean Strategy
Compete in existing market
space.
Beat the competition.
Exploit existing demand.
Make the value-cost trade-off.
Align the whole system of a
strategic firm's activities with
its choice of differentiation or
low cost.
Blue Ocean Strategy
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
firm's activities in pursuit of
differentiation and low cost.
VALUE INNOVATION
The rising Imperative of Creating Blue Oceans

• supply exceeds demand

• globalization
• accelerated commoditization of products and services
• increasing price wars
• shrinking profit margins
• brands are becoming more similar
select based on price
• ...
 BOS Logic: The Core Principles

Reconstruct Market
Boundaries
… overcome believes.

Reach beyond
existing Demand
… go for uncontested space. COST

VI
VI
Get the strategic
sequence right
VALUE
… value [innovation] first.
 BOS Logic: Reconstruct market boundaries
Boundaries of Head-to-Head Creating
Competition Competition New Market Space
Focuses on rivals within its Looks across alternative
Industry industries
industry

Focuses on competitive position Looks across strategic groups

Strategic Group within its industry
within strategic group

Focuses on better serving the Redefines the buyer group of the

Buyer Group industry
buyer group

Scope of Product Focuses on maximizing the value Looks across to complementary

and Service of product and service offerings product and service offerings that
Offerings within the bounds of its industry go beyond the bounds of its
industry
Focuses on improving price- Rethinks the functional-emotional
Functional-emotional
performance with the functional- orientation of its industry
Orientation of an
emotional orientation of this
Industry
industry

Focuses on adapting to external Participation in shaping external

Time/Trends trends over time
trends as they occur
 BOS Logic: The Core Principles

Reconstruct Market
Boundaries
… overcome believes.

Reach beyond
existing Demand
… go for uncontested space. COST

VI
VI
Get the strategic
sequence right
VALUE
… value [innovation] first.
BOS Logic: Reach beyond existing demand

Core Customer Noncostumer

Soon-to-be-NC Refusing Customer

 BOS Logic: The Core Principles

Reconstruct Market
Boundaries
… overcome believes.

Reach beyond
existing Demand
… go for uncontested space. COST

VI
VI
Get the strategic
sequence right
VALUE
… value [innovation] first.
 BOS Logic: Get the Strategic Sequence right
Buyer utility
Is there exceptional buyer
utility in your business idea?
No  Rethink
YES
Price
Is your price easily accessible to
the mass of buyers?
No  Rethink
YES
Cost
Can you attain your cost target to
profit at your strategic price? No  Rethink
YES
Adoption
What are the adoption hurdles in
actualizing your business idea?
Are you addressing them up No  Rethink
front?

YES
A commercially viable Blue Ocean Strategy
The case of Accor's Formule 1
The value curve of Formule 1 in the French Low Budget Hotel Industry