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Blue Ocean Strategy

Creating uncontested market space and make the competition irrelevant

Presented By: Muhammad Nasir Hamid Bilal

About the Authors : Chan & Renee

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

Rene Mauborgne The INSEAD Distinguished Fellow and Professor of Strategy and International Management

Blue and Red Ocean Strategies

Red Ocean Compete in crowded markets Blue Ocean Create and capture new market space

Two worlds
Red Ocean Strategy
Compete in existing market space. Beat the competition. Exploit existing demand. Make the value-cost trade-off.

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 Align the whole system of a strategic firm's activities with its firm's activities in pursuit of choice of differentiation or low differentiation and low cost. cost. VALUE INNOVATION

Creating Blue Oceans

Two types of markets:

Red Oceans all industries in existence today (known market space) Blue Oceans all industries not in existence today (unknown market space)

The phrase Blue oceans is new, but the concept is not. Think of what industries existed in 1900. Example Ford T-model

Value pioneering Turning unattractive industry into an attractive one Use of existing technology no R&D costs, just strategic thinking

Creation of a Blue Ocean

1. Create new Industry 2. Create from existing Red Ocean

The rising Imperative of Creating Blue Oceans

Supply exceeds demand Products turning into commodities Increasing price wars Shrinking profit margins Brands are becoming more similar

The Profit and Growth Consequences of Blue Oceans

Value innovation is the new strategic logic behind Blue Ocean Strategy. Instead of focussing on beating the competition, you focus on making it irrelevant by creating a leap in value for buyers and creating uncontested market space.

2 Advantages of Blue Ocean Strategy

Differentiation and Low Cost Leadership is
achieved simultaneously Safe barrier of imitation for 10 to 15 years

Graph of Value Innovation

Unlocking non-customer demand

Value Innovation Utility
Create new buyer utilities

Set a price that attracts a mass of buyers

Set the structure based on a target

The Case of Cirque du Soleil

Cirque was founded in 1884 and group of

street performers and entertainers. achieved rapid growth in a declining industry with low profit potential. At decline due to alternate mode of entertainment, Video Games such as play stations, TV entertainment etc Animal Rights

Cirque created uncontested new market
space that made the competition irrelevant It created blue ocean from read ocean by creating theater, opera and ballet for adults and corporate clients who were traditionally non customers.

Example: Cirque

Instead of simply trying to outpace the

competition, Cirque offered people both the fun and thrill of the circus and the intellectual sophistication of the theater Because of this, Cirque du Soleil appealed to both circus customers (Children) and noncustomers (Adults)

Example: Cirque

Each show, like a theater production, had

its own unique theme and storyline This allowed customers to return to the show more frequently They also did away with the traditional high-priced concessions and vendors thereby cutting costs

Example: Cirque

Cirque du Soleil effectively combined the

best of both the circus and the theater while eliminating everything else This allowed them to achieve both differentiation and low cost

Thank you