Blue Ocean Strategy.Pdf

In: Business and Management

Submitted By ahmedshams
Words 72692
Pages 291

Blue Ocean Strategy
How to Create Uncontested Market Space and Make the Competition Irrelevant


( ) ( ) ( ) ( ) (
W. Chan Kim Renée Mauborgne

Copyright 2005 Harvard Business School Publishing Corporation All rights reserved Printed in the United States of America 09 08 07 06 05 5 4 3 2 1

No part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, mechanical, photocopying, recording, or otherwise), without the prior permission of the publisher. Requests for permission should be directed to, or mailed to Permissions, Harvard Business School Publishing, 60 Harvard Way, Boston, Massachusetts 02163. Library of Congress Cataloging-in-Publication Data Kim, W. Chan. Blue ocean strategy: how to create uncontested market space and make the competition irrelevant / W. Chan Kim, Renée Mauborgne. p. cm. Includes bibliographical references and index. ISBN 1-59139-619-0 (hardcover: alk. paper) 1. New products. 2. Market segmentation. I. Mauborgne, Renée. II. Title. HF5415.153.K53 2005 658.8 02—dc22 2004020857 The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Publications and Documents in Libraries and Archives Z39.48–1992

To friendship and to our families, who make our worlds more meaningful

( ) ( ) ( ) ( )
Preface Acknowledgments

ix xiii

Part One: Blue Ocean Strategy
1 2 Creating Blue Oceans Analytical Tools and Frameworks 3 23

Part Two: Formulating Blue Ocean Strategy
3 4 5 6 Reconstruct Market Boundaries Focus on the Big Picture, Not the Numbers Reach Beyond Existing Demand Get the Strategic Sequence Right 47 81 101 117



Part Three:…...

Similar Documents

Blue Ocean

...common to an... Under blue ocean strategy, firms pursue both cost and differentiation advantages at the same time instead of focusing on one of these. Such a pursuit will involve creating innovative customer value with no existing competition. As a result, the firms are able to operate in an “uncontested” market space and generate high profits. The case of Cirque du Soleil is used as a prominent example of the the strategy by the authors of the book Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant Chan Kim and Renee Mauborgne. Cirque du Soliel transformed the conventional circus experience into a completely new experience by combining elements of circus and theatre. They did this by eliminating several elements of conventional circus such as animal shows and multiple rings, and adding elements of theatre that provided an emotional content, such as telling a story through the circus performance. This was a market space with no competitors and the company was able to stage its shows all over the world to enthralled audiences. The core of Blue Ocean Strategy is Value Innovation that involves going beyond the conventional boundaries of an industry and creating a new kind of value by bringing in unique elements, often from other industries. At the same time, cost is reduced by eliminating elements that the target market do not value all that much. Unlike pursuing either cost leadership  OR differentiation, blue ocean strategy......

Words: 561 - Pages: 3

Blue Ocean

...Visi Pramudia BLUE OCEAN STRATEGY Authors: W. Chan Kim – Renee Mauborgne How to Create Uncontested Market Space and Make the Competition Irrelevant Visi Pramudia I. THE STRATEGY Visi Pramudia New Market Space known market space RED OCEAN Represent all the industries in existence today BLUE OCEAN Denote all the industries not in existence today space Circus Industry Traditional Circus: • Target Market : Children • Dependent to : Star performance, animal shows • High fun & humor • High Thrills & dangers unknown market Cirque du Soleil: • Target Market : Adults • Not Dependent to Star performance & animal shows • Reduce fun & humor • Reduce Thrills & dangers • Unique Venue • Theme & Theater Low Cost, High Price High Cost, Low Price Visi Pramudia The Cornerstone of Blue Ocean Strategy • Value innovation is created in the region where a company’s actions favorably affect both its cost structure and its value proportion to buyers • Cost savings are made by eliminating and reducing the factors an industry competes on • Buyer values is lifted by raising & creating elements the industry has never offered • Over time, costs are reduced further as scale economies kick in due to the high sales volumes that superior value generates The Simultaneous Pursuit of Differentiation and Low......

Words: 1310 - Pages: 6

Blue Ocean

...02/05/2013 Article: Harvard, Blue ocean strategy “Competing in high overcrowded industries is no way to sustain high performance. The real opportunity is to create blue oceans of uncontested market place.” This quote that is on the top of the first page just about sums up the article, but I will go further in depth in what the article says. What is the best way to drive profitable growth in an industry? Or company? According to the article it is to enter into the market place that is not existent today that has no or little competitors. This is known as blue ocean. Red ocean on the other hand is the already existent market place that has a high number of competitors; all of the boundaries are already defined and accepted. The article refers to red ocean as a war because competitors battle against one another for market share and ultimately are trying to put the other out of business. The competition can be bloody and downright cut throat. The article encourages business to make a switch from the red ocean strategy to blue ocean strategy. Cirque Soleil is a prime example given that used blue ocean strategy. The circus idea was not new, but actually an unpopular event at the time that Cirque Soleil became a main hit. Cirque Soleil broke from a red ocean into a blue ocean (where most blue oceans are created) by breaking through the traditional boundary of separating circus and theatre. The other way that a company can become blue ocean is to give rise to......

Words: 586 - Pages: 3

Blue Ocean

...Managerial Marketing Blue Ocean Strategy by W. Chan Kim The second part describes the four principles of blue ocean strategy formulation: how to create uncontested market space by reconstructing market boundaries, focusing on the big picture, reaching beyond existing demand and getting the strategic sequence right. These four formulation principles address how an organization can create blue oceans by looking across the six conventional boundaries of competition (Six Paths Framework), reduce their planning risk by following the four steps of visualizing strategy, create new demand by unlocking the three tiers of noncustomers and launch a commercially-viable blue ocean idea by aligning unprecedented utility of an offering with strategic pricing and target costing and by overcoming adoption hurdles. The book uses many examples across industries to demonstrate how to break out of traditional competitive (structuralist) strategic thinking and to grow demand and profits for the company and the industry by using blue ocean (reconstructionist) strategic thinking. The third and final part describes the two key implementation principles of blue ocean strategy including tipping point leadership and fair process. These implementation principles are essential for leaders to overcome the four key organizational hurdles that can prevent even the best strategies from being executed. The four key hurdles comprise the cognitive, resource, motivational and political hurdles that......

Words: 2130 - Pages: 9

Blue Ocean

...Blue Ocean Strategy In the article, two types of business space defined. First one is red ocean and other is blue. Red oceans are the markets and businesses we know. Rules of the existing markets are well defined. When all the variables are known and equally effect the players in the market, all players think somewhat the same thing and generate close strategies like in the game theory /prisoners dilemma. Generally, their options are in between differentiation and low cost. Either way companies fac e ruthless competition, slightly differentiated offerings with minimal costs. This environment is the hardest to survive while the demand for known markets are not increasing. On the other hand there some companies that are not suffering by the ultimate competition even they are not in a monopoly. They explored and defined new markets that only they can fit in with the blue ocean strategy. In this case, famous Cirque du Soleil achieved Demand for circus was decreasing and this company has to do something as others in the market. Instead of lowering the costs or differentiating themselves with traditional ways they differentiated the market from a classical circus to a something offers an artistic value. They took some shows out which were costly but not demanded anymore and added some values to the circus that could attract even older people and generate higher profit. They are more than a circus right now more close to theater or other performing arts. The idea......

Words: 493 - Pages: 2

Blue Ocean

...Blue Ocean Strategy Shawn Good MKT/421 August 18, 2014 Mark McClintock Blue Ocean Strategy If a company wants to be an overachiever, sometimes a company needs to venture out in untested waters to see what can happen with a product or service it will offer. Companies can find out if what they are offering will be successful or not, instead of being complacent in companies doing the same thing. There are two strategies to companies doing something new called blue ocean strategy. Or the strategy of doing the same thing over and over called red Ocean strategy. Blue Ocean Strategy Blue ocean strategy can be defined as “the unknown market space, untainted by competition” (Kim & Mauborgne, 2004). Blue oceans are started in two ways, one being a company starting a new industry that has yet to be tapped. The second way is when a company looks at how to improve or alter the product in the current industry. Blue ocean strategy is important to any company in any industry. Using blue ocean strategy will allow the company to remain viable and to keep their customer base energized by the product they offer. Blue ocean strategy allows the companies to look at the possibility of recreating themselves which could lead to new customers and improved profits. It allows companies to look at the big picture instead of having the blinders only to see directly in front of them instead of around them. Example of a Blue Ocean Product or Service A product example that falls...

Words: 829 - Pages: 4

Blue Ocean

...Blue Ocean Strategy MKT 421 Blue Ocean Strategy Description of Blue Ocean Strategy and its Significance According to Cham Kim and Renee Mauborgne (2004), the Blue Ocean strategy involves the description of how the organization should try and proceed to find some way to work in the marketplace that is not bloodied by the competition and also that is free of competitors. The strategy is against working in conditions such as Red Ocean, where businesses are fighting each other for some share of the marketplace. In essence, businesses are most often looking for ways that can better contend with their competitors, and that is the Blue Ocean strategy. According to the book, Blue Ocean Strategy, the leading companies succeed not by battling with competitors, but by systematically developing “Blue Oceans” of uncontested market space ripe for the growth. Such a strategy of Blue Oceans entails the simultaneous pursuit of differentiation and also low cost, including the theory behind it not to outperform the competition in the on-hand industry, but to develop new market space or rather the “Blue Ocean”, in which case it makes the competition irrelevant. As such, the Blue Ocean strategy illustrates the opportunities of vast and untapped market spaces (Kim & Mauborgne, 2004). The Blue Ocean strategy is quite important. This is because it allows some business to sell its products with no or little competition from other firms. It is also......

Words: 943 - Pages: 4

Blue Ocean

...Blue Ocean Strategy Jaime Quintero MKT/421 March 23, 2015 Salomon Chavira Blue Ocean Strategy While businesses are continuously looking for techniques in which they can better cope with their rivals, one theory recommends they would be better off studying methods in which they are contending against no one but themselves. This is known as the blue ocean strategy. Blue Ocean Blue Ocean Strategy is a recently established marketing concept obtained from the devises of W. Chan Kim and Renée Mauborgne. This term is used to describe instead of working in conditions, known as the red ocean, where companies are savagely hostile against each other for a share of the marketplace, businesses should attempt to discover a means to work in a marketplace that is not riddled with competition and is free of rivalries. In this marketing theory red and blue oceans were selected to indicate the division. Chan’s notion has great significance as it is germane in the current marketplace. It is beneficial to industrialists and business owners considering what choices to make and create the suitable market for their goods or services while investing in the appropriate areas (Schawbel, 2014). Red versus Blue In one respect, globalized production, international channels of data and technological advances have actively intensified industry production. This empowered merchants to fabricate a widespread collection of goods and services......

Words: 846 - Pages: 4

Blue Ocean

...The Blue Ocean strategy in marketing is a unique approach to building a customer base. Instead of trying to compete in an overcrowded marketplace with existing companies, a Blue Ocean strategy seeks to build an entirely new market area. With the rapid growth of technology and globalization, the importance of a Blue Ocean strategy has grown in recent years. The “Blue Ocean strategy” is a term that originated from the 2005 book, The Blue Ocean Strategy, by W. Chan Kim and Renee Mauborgne that describes the opportunities of vast, untapped market spaces, or "Blue Oceans," that can be developed by expanding market boundaries or launching new industries. The concept of "Blue Ocean strategy" was first acknowledged by the business world in 2005 when the correspondence was initially released. In essence, Blue Oceans are associated with high potential profits. Since it’s released it has been translated in 43 languages. The authors discuss the benefits for business owners to leave the Red Ocean, characterized by the bloody, shark-infested waters of competition, and enter the Blue Ocean, where there is no competition and limitless space to create something new. According to inserts found throughout the book, it is important to evaluate your business to determine whether you should rethink your market strategy and enter the "Blue Ocean." The most important feature of Blue Ocean strategy is that it disregards the basic principles of conventional strategy: that a trade-off exists......

Words: 849 - Pages: 4

Blue Ocean

...Blue Ocean Strategy Blue Ocean Strategy The principle of a Blue Ocean Strategy is when a business reinvents itself within its given market to make them stand out as different from the rest of the competition. A company does this by an area within the market that is untouched or has low competition. According to Chan and Renee (2004) “Competing in overcrowded industries is no way to sustain high performance. The real opportunity is to create blue oceans of uncontested market space.” An example of a business that is currently doing this is Tesla Motors. Several car companies have released electric or hybrid cars, but they have all been unaffordable, and never stylish. The only company that has made them and actually focused on making them appeal to consumers is Tesla Motors. A red ocean move that Tesla could have taken would be to just enter the automotive market and build conventional vehicles. They could have made their vehicles so they are a hybrid, or just gas powered only. The biggest pros of this are that the technology is already there and it would be easy to make the cars affordable. Less money would have been spent in research and design and they could have been mass produced rather quickly. But, it is the cons of being in a red ocean that drive a business to enter the blue ocean. The cons of using a red ocean strategy are that the automotive market is heavily saturated. The companies that are already making conventional vehicles are very well established and has......

Words: 435 - Pages: 2

Blue Ocean Strategy

...Blue Ocean Strategy Paper The blue ocean strategy in marketing is a business theory that helps search for ways to gain uncontested market space, this is seen as a unique approach to building a customer base. The following essay will analyze the blue ocean strategy and its importance, while providing a product or service that might be considered a blue ocean strategy. Lastly, an alternative red ocean move for the same product or service along with the pros and cons of that strategy will be discussed. Blue Ocean Strategy was developed by W. Chan Kim and Renee Mauborgne. “It describes how companies traditionally work in "red ocean" conditions, where businesses viciously fight against each other for a share of the marketplace. Instead, according to the blue ocean strategy, organizations should find a way to work in a marketplace that is free of competitors.” ("Blue Ocean Strategy", 2015). The purpose of the Blue Ocean strategy is to create an uncontested market place while making the competition irrelevant. By doing so this creates and captures new demands and breaks the value-cost trade off. In result, this aligns the whole system of a business’s activities in pursuit of differentiation and low cost. This strategy is important for businesses because in order to make your competition irrelevant, you must leave the red ocean and go to the blue ocean. Once in the blue ocean, you only need to create demand for your product or service. Examples of Blue Ocean Moves There......

Words: 717 - Pages: 3

Blue Oceans

...ANALYSIS The article in Harvard Business Review, Blue Ocean Strategy written by W. Chan Kim and Renee Mauborgne, gives an insight to how Cirque du Soleil has implemented a Blue Ocean Strategy when creating its business. This article provides examples for examining alternative purposes and approaches of Blue Ocean Strategies. It appraises the benefits that a Blue Ocean Strategy brings a company by expanding its growth and profit in a much faster speed. It achieves these benefits by creating new market space and making competition irrelevant. The analysis of Blue Ocean Strategy focuses on creating new markets and industries. Its methodology is to compare the Red Ocean Strategy with the Blue Ocean Strategy. The comparison gives detail to the most important difference between the two strategies, which is the market they target. While a Red Ocean Strategy is referring to an industry that is already well established in the market place and pretty much has attained its peak in popularity. In this Red Ocean Strategy if you were to come in as a new business it would be to compete at the same level and perhaps just trying to outperform your competitor in order to take a share of the demand already in existence for that industry. But, when talking about the Blue Ocean Strategy, the ideology gives a 360 degree shift. In a Blue Ocean Strategy the demand is created by introducing something completely new. You produce a new business which has not been introduced before and therefore,...

Words: 1158 - Pages: 5

Blue Ocean Strategy

...Blue Ocean Strategy Paper Jamie Carbary MKT 421 Professor William Alan McIntyre November 23rd, 2015 Blue Ocean Strategy Paper Introduction In the current competitive market, businesses often adopt several strategies so as to compete effectively. These strategic moves are usually derived from market – competing strategies. Innovation and creativity are the keys whereby organizations can focus on finding and creating new market spaces resulting in the opening of the new market and increasing their profit margins. The term “Blue Ocean” denotes all the industries that are not in existence today (Kim & Mauborgne, 2004). It includes unknown market and is untainted by competitions. In blue oceans, demand is created rather than fought over. Thus, there is an ample opportunity for growth that is rapid and profitable too. On the other hand "Red Ocean" is regarded as the existing market space with numerous risks and limited opportunities with limited profit margin, whereby companies strive to sustain their position (Gruwer, 2014). The companies operate in saturated market conditions with numerous small and big players and try hard to exploit the demand of customers. Blue Ocean Strategy Blue ocean strategy is the new way of thinking, a new strategic mind – set, a bold and new path to winning the future. It is grounded in analysis and energizes everyone. Blue ocean strategy focuses on creating new markets rather than competing with existing ones so as to stand apart and......

Words: 1226 - Pages: 5

Blue Ocean Summary

...Contents: 1 Introduction 2 Frameworks and analytics for Blue Ocean Strategy * Strategy Canvas * The Four Actions Framework * Eliminate- Reduce- Raise- Create Grid * Pioneer-Migrator-Settler Map * Buyer utility Map * Three Tiers of Noncustomers * Sequence of the Blue Ocean Strategy 3 Conclusion 4 Appendix Introduction: Due to the rapid development of logistic, communication tools, the world has become ‘smaller’ and ‘flatter’ than ever. Instead of competing with the local firms, nowadays companies would have to compete in the global environment. The entry and trade barriers for most of the market have been eliminated due to the regulations and the growth of technology. Here, the concept of ‘Blue Oceans’ comes into place. We can imagine a market universe consisted of two sorts of oceans: Red oceans and blue Oceans. Red oceans represent all the existed industries and market nowadays. In the red oceans, industry boundaries and standard are well defined and accepted, the formation and situation of the market can be understand and work out easily. The accelerated technological advances and the trend toward globalization have substantially improved industrial productivity and have enabled suppliers to produce an array of products and services, which lead to the supply exceeds demand. Due to the removal of trade barriers between nations and regions, the information on products and prices become more globally available. As a......

Words: 2790 - Pages: 12

Blue Ocean

...thought of as an ocean. The ocean can be divided into two segments: the red ocean and the blue ocean. The red ocean is comprised of existing market segments and this space contains all things in existence today. The competition in this space is fierce. Conversely, the blue ocean represents all things not in existence today or the opportunity to reengineer an established industry. The framework for formulating a Blue Ocean Strategy is explained in the following paragraphs. The first principle is reconstructing market boundaries. When creating a Blue Ocean Strategy, an entrepreneur must look within an existing industry and think beyond the current boundaries. Reengineering an established practice within an industry or creating something new will enable an entrepreneur to create a new market segment or maybe even a new industry. The company should look across alternative industries, consumer groups, and at other products or services that may help complement their own. By utilizing this cross-cultural approach, opportunity is created for the growth and development of a new market. The second principle when initially creating a strategy is for an entrepreneur to focus on the big picture and not the details. If the big picture is understood, the details will be easier to put into place. Without a big picture focus, creativity and innovation could get lost in the details. Corporate strategy must include big picture thinking. Breaking into a blue ocean market......

Words: 558 - Pages: 3