Blue Ocean Strategy

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Creating uncontested market space. Explanation of Blue Ocean Strategy of W. Chan Kim and Renée Mauborgne. ('04)



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Blue Ocean Strategy Red Ocean

What is Blue Ocean Strategy? Description

Rather than competing within the confines of the existing industry or trying to steal customers from rivals (Bloody or Red Ocean Strategy) W. Chan Kim and Renée Mauborgne are suggesting Blue Ocean Strategy: developing uncontested market space that makes the competition irrelevant.

 

According to Kim and Mauborgne in the HBR of October 2004, competing in overcrowded industries is no way to sustain high performance. The real opportunity is: to create blue oceans of uncontested market space.

 

Competitive Advantage critique

Of course competition is important. But by focusing on competition and competitive advantage, according to Kim and Mauborgne, scholars, companies, and consultants have ignored two very important - and far more lucrative - aspects of strategy:

  • To find and develop blue oceans, and
  • To exploit and protect blue oceans. These challenges are very different from those to which strategists have devoted most of their attention.

In blue oceans demand is created, rather than fought over. There is ample opportunity for growth that is both profitable and rapid.

 

Two ways to create blue oceans

  1. One is to launch completely new industries, as eBay did with online auctions.
  2. It is more common for a blue ocean to be created from within a red ocean when a company expands the boundaries of an existing industry.

Certainly Kim and Mauborgne deserve credits for having made the point of the over-focus on competitive advantage and also for their beautiful metaphor of the two types of oceans.

 

Book: W. Chan Kim, Renée Mauborgne - Blue Ocean Strategy -

 

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Recent User Comments
Aliuddin Faisal Faruqui - India Uncontested Industry or Uncontested Marketplace "If the size of a market is very large and there are still lots of options to go for then why should we go for a uncontested industry? Developing countries have lots of space in their current market for individuals to grow or must I say it is still uncontested market place?"    0
Daniel Ghanime - Lebanon A New Record Label... Like no Other "Being in the music business since 1991, as an owner of studio, I have the idea to start a new record label that doesn't look like any other in the country...
Knowing that the recorded music market is in continuous decline recording for free and promoting bands while doing cross selling...
Do you think it is a good idea?"
   0
Atba Bouchaib - Morocco Blue Ocean Strategy and R&D Budget "Hello everybody, I can't imagine an entreprise carrying on blue ocean strategy without creating a strong, qualified and efficient R&D unit within its organisation.
Consequently, the budget assigned to the R&D activities should be important.
What do you think?"
   0
Ebonee Wright - USA Steps in Developing a Blue Ocean Strategy "Buyer utility is the first step in the sequence of developing a blue ocean strategy. According to Kim & Mauborgne(2009) on their website blueoceanstrategy.com, when considering the first step a company should ask themselves, “is there a compelling reason for the mass of people to buy it”. If the recording industry can develop a medium for selling albums that is more convenient and less expensive than purchasing a CD, then the answer would be yes, there would be a reason for the mass of people to buy it."    0
Gleb Larionov - Russia Use All Factors "To create a Blue Ocean you must not only create or modify a quality product, you also have to pack it for getting information advantages and improve the value of the company's brand."    0



Best User Comments
Sharad Donga - Netherlands Visionary Leadership and Blue Ocean Strategy "I think it merely depends on the leadership of the leaders, how visionary a leader is and how far business is seen. The process of achieving vision will generate and execute blue ocean strategy involuntary. I think it is all about being visionary and setting the vision changing the world."    35
Bekti Harsono - Indonesia Another use of BOS "Many people think BOS is only applicable for creating new markets, outside a company. Though, the Blue Ocean concept can also be applied while working inside companies. Discovering new/breakthrough in problem solving, effectively get the result will result in better business for the company. Why I say inside a company? Not every single one of us has a business mind / orientation / talent. Most of creative & genius people need someone else to sell & convert their ideas to become money. So, yes, we need to think out of the box, given we have searched in every single corner INSIDE our box."    23
Jalpa - India Blue Ocean Strategy "After creating new market/industry, how competitors can be restricted to imitate the same. Complete overlook of competition is possible ?"    18
Helen - Canada Strategy Canvas "Kim and Mauborgne introduce in their book an interesting tool they call "The Strategy Canvas". The Strategy Canvas is both a diagnostic and an action framework for building a Blue Ocean Strategy. In this diagram you plot on the vertical axis the value (low to high) that CUSTOMERS of the product give to it on certain EXISTING factors, which are listed on the horizontal axis. With a line connecting all scores you list each offering. Then you shift the focus to look for ALTERNATIVES for NONCUSTOMERS, introducing new factors for new customers. This can be achieved in 6 ways: by looking across alternative industries, by looking across strategic groups (pursuing a similar strategy), by looking across the chain of buyers, by looking across complementory product and service offerings, by looking across functional or emotional appeal to buyers, and even by looking across time."    15
Enrique - Colombia BOS: more of the same "Blue Ocean Strategy is just more of the same old stuff. It takes industry analysis from Porter, differentiation from Trout and the ancient concept of strategy from Sun Tzu. There is not anything new with this theory. It is just a nice catching title, merely good for selling books."    10
Sapto Rahardjo - Indonesia Blue Ocean Strategy "I think the success of blue ocean strategy depends on the person who is in charge as manager or CEO to run this strategy."    9
Helen - Canada Four Actions Framework "The second tool Kim and Mauborgne are describing is the "Four Actions Framework". This Four Actions Framework can be used to challenge the existing strategic logic and create new value curves by asking 4 questions: 1. Which of the factors that the industry takes for granted should be ELIMINATED? 2. Which factors should be REDUCED well below the industry's standard? 3. Which factors should be RAISED well above the industry's standard? 4. Which factors should be CREATED that the industry has never offered? The answers to these 4 questions can then be listed in a 2x2 matrix the authors call the Eliminate-Reduce-Raise-Create Grid."    6
Kashif Riaz - Pakistan Blue Ocean & Red Ocean "Blue ocean is a segmentation of the market into competitor less markets mostly these markets have better buying power (you can price what ever you want) and can help a startup company up the ladder... Nice Book"    3
Jose - India BOS "It is definitely an interesting insight and can prompt us to think out of the box. I am sure often one is too engrossed in red ocean fights and a novel way to explore blue oceans by leveraging ones core competence is a good strategy. An eg. could be the technology products always reinvent new blue oceans. Apple IPOD, Digitial camera, GPS phones are all blue oceans."    3
Katherine - USA Blue Ocean Strategy on Disney "For school, I have to devise a blue ocean strategy for a specific business and industry (and post it in a user group such as this one_- I also need your responses to work with, lol:)
I chose to use the amusement park industry, focusing on Disney. My strategy involves finding the commonalities of my non customers (the three tiers spoke of in the book). I am going to focus on those who may choose camping as an alternative activity-but have, on occasion, visited the park; those who may have considered Disney but opted not to come because they hate long lines, crowds, etc.; and those who don't even consider Disney because they don't think Disney has what they want (such as a camper--who thinks of going camping at Disney?).
I have to map out the stages of buyer experience and the utility levers at each stage, trying to find an area that needs improvement-because that is where one should find blue ocean. Any comments?"
   2
K. Ravindran - India Blue Ocean within a Red Ocean "You can always find calm water spots (blue ocean) within the choppy water (red ocean). As the water is flowing constantly, so the the business environment too. There exists new market opportunities. Many such opportunities are unfulfilled. Marketers have to take note of this unmet demands by supplying new product solution. This way there is always a blue ocean within the red ocean"    2
Steve - USA Blue Ocean Strategy for Office Equipment (Xerox) "I decided to look at Xerox and the office equipment industry and see if I could get Xerox headed toward a blue ocean. Here is my 6 paths strategy for conceiving new market space:
Path 1: analyze alternative industries. There are many reasons why consumers choose another solution for their office equipment needs. They may go to an off-site printer instead of an in-house one. I would set up a consulting group that could help new printing businesses from start to finish
Path 2: look across strategic groups. Xerox needs to re-assess the strategic groups it competes with, and figure out where its technology and services can be applied where they are not currently.
Path 3: look across the chain of buyers. This is a challenge. Xerox is known as the Cadillac of office equipment, right along with the Cadillac price! They are also known for quality, however.
Path 4: look across complimentary product or service offerings. Holds lots of promise for xerox. The idea of a total office equipment solution from one provider holds lots of appeal. Xerox does this now, but I would simply expand it, and consultants able to provide this service.
Path 5: look across functional or emotional appeal to buyers. Xerox already follows this oath. They have a well recognized brand. Anyone who hears that name will know what they do. The need to market a little better to show the overall competitive cost of the life of their equipment.
Path 6: look across time. Xerox is strong along path six as well. They have a research division second to none in the industry. They should be able to leverage this to further differentiate themselves from their competition.
My work is cut out for me with Xerox. Thanks in advance for any comments."
   1
Darshit Shah - India Main Challenges of Blue Ocean Strategy "What are the challenges of entering in an uncontested market and what strategies can be used to overcome them?"    0
Kellie Fuentes - USA Blue Ocean Strategy for SanDisk "For an assignment I have to create a BOS for SanDisk Sansa MP3 players. My plan is that Sansa can utilize already available technologies and create the first MP3 player that does not need a computer to download music. The player should be able to upload MP3's by itself by the press of a button and purchase on a Sansa website that it links to with a credit card already on file. It would not have to have full internet capabilities. They can raise their prices to match the production costs but lower costs also by eliminating the unnecessary radio function on their players. They need to pull out of the shadows of Apple's Ipod. Any comments greatly appreciated!"    0
Kelly - USA Blue Ocean Strategy AT&T "I have to create a blue ocean strategy for AT&T and the Alternative-fuel vehicle they plan to release in 2019. Is there buyer utility? The answer to that would be yes there is. With so many people becoming Eco friendly a vehicle that can do all the things AT&T is claiming it can do will definately be a hot item come 2019. Is this vehicle going to be affordable to its buyers? The answer to that is more than likely no. In past studies these vehicles have shown to be pretty expensive, but if AT&T and CNG can create these vehicles with the least amount of cost to them by maybe using recycled parts which in turn would be even more environmentally friendly, they could kill 2 birds with one stone:
1) make these vehicles cheaper and eco friendly and
2) make them affordable to all people so that everyone can buy them, which is turn is better for the environment because now more people have eco friendly cars rather than gas hogs. The biggest hurdle is making it affordable."
   0
Michael A. Santon - USA Blue Ocean Strategy for Regal Entertainment "The Regal Entertainment must look for new ways to deliver the experience of movie going. A gimmick such as Day Care could accompany the movie experience and help to open a new demographic. They would then need to look at different companies within their industry to determine the best ways that their competition is delivering the overall experience. They should take a look at scheduling of movies offered. It would be possible for them to make a new system that is more accommodating to the consumer. For a movie company to incorporate a complimentary service such as day care would be huge for the industry. Many industries are using day care to open the doors for a new demographic. Regal could play on the day care service as a tool to show that they care about adults who can’t enjoy a night out because of their children. It would be most important for Regal to see the transition from the past to the present and determine the direction that is leading to the future and beat other companies to that point."    0
Richard Hartshorn - USA Blue Ocean Strategy for Garmin (A Focus on 6 Paths) "6 paths strategy for conceiving new market space:
Path 1: analyze alternative industries - Garmin should look at designing a watch that is uncomplicated to use, has a minimal complement of buttons, and give it a sleeker look.
Path 2: look across strategic groups. Developing a watch that is customizable for different groups of common users including only the functionality customers typically want.
Path 3: look across the chain of buyers. I don’t see how this path would be beneficial to garmin. Any suggestions?
Path 4: look across complimentary product or service offerings. Does anyone have any ideas?
Path 5: look across functional or emotional appeal to buyers. To add emotional appeal, garmin could produce a fitness watch focused on fashion so customers can wear them to workout as well as to work.
Path 6: look across time. Garmin will definitely need to pace their actions with the latest developments in technology, like solar/kinetic power, to incorporate more value into their watches."
   0
Asad Gul - Pakistan Blue Ocean Strategy in Existing Businesses? "How can one utilize BOS in an existing business like freight forwarding, where thousand of companies have been working; what possibly can be the competitive advantage?"    0
Sungani Mkandawire - Malawi Blue Ocean Strategy in Africa: Statutory Corporations "Can we say that statutory corporations mainly in Africa are operating in a blue ocean strategy since they operate in uncontested market and most of them like national water boards have natural barriers which will require huge investments if another company has to venture into this and also they are mostly protected by laws on their countries which makes competition irrelevant?"    0
James - USA Blue Ocean Strategy for AT&T "For a class paper, I have to develop a blue ocean strategy for an industry. The industry I chose was home telephone companies such as AT&T and Verizon. For many years they operated under a red ocean strategy; however, in the past few years, they have lost a substantial amount of home telephone customers to cable companies. I have to identify the three tiers of noncustomers as well as map out the stages of a buyer utility. If anyone has any input that would be beneficial, I would appreciate it."    0
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   Ebonee Wright (USA) Second Step in Sequence "The next step in the BOS sequence is price. The goal of a blue ocean strategy for the recording industry is to recoup some of the losses stemming from loss of CD sales. Price will be a big part of that. The price has to be set just right to persuade previous noncustomers to buy, especially the tier two noncustomers who were not purchasing due to inability to afford CDs. “a company does not want to rely solely on price to create demand” (Kim & Mauborgne, 2005). Price will be only one part of the leap in value achieved by finding a new medium for selling music to the public. For the noncustomers who were downloading music for free, there would definitely need to be another reason to create a demand from them because there is no price and nothing is as good as getting something for free."


   Elizabeth (USA-stanford) BOC and leadership "Yes I do agree partly, if leader namely CEO is not able to forsee the business and correctly launch the vision then it automatically discourages the out of box thinking process and so does BOC."
   Mark (UK- oxford said) Leadership and BOS "i completely agree since often we experience that in the end only leaders or their voice builds the consensus. And this entire process as well as its outcome normally shapes the organization or business activities. So if the idea or built voice is lousy anyway then forget the BOS. Capable leadership and especially a capable CEO plays a crucial role here."
   Bernadette (Kenya) BOC Strategy Visionary Leadership "It is quite true that for a BOC strategy to be used a leader has to have a vision. This kind of strategy is used by very innovative people/leaders, innovators who want to keep off the competition with their strategy. One must be very alert not to do it for the imitators who come fast and perfect."

   Karuna (India) Blue Ocean strategy "It's all about new ideas, innovation and out of the box thinking. And of course these opportunities can be fetched from the existing market trends. One can only think OOB if one has enough knowledge in his special field and has more and more expectations or we can say not satisfied by red ocean."

   Sangeet (India) Competitive Advantage "Should be explained with core competence also. How core competence helps build cost leadership or differentiation with real examples."
   Harshil (India) BOS Jalpas Reaction "That is something called your "TM". One basically cannot stop people from imatating, but can still work in BOS finding the UNIQUE space and tll some1 do not imatae you, u r the leader. there are some programs with govt that do not allow imatating of some products for so many years. i think that is much possible with all R&D Products"
   Samir Randive (Australia) Competition is Good "Refering to your qustion jalpa. No matter what you create or where you do business, competition is most important factor to succeed. Can you imagine playing a game without anybody in the field. To win the game you have to beat somebody.competition always brings out best of the business. Without competition any business will become complacent and eventually over a period loose its competitive strength. Also for the customers to notice the products, competition is important."

   Jerry (Singapore) Clarification "Hi Helen. I would like to know more about this s-canvas. Is this canvas used to identify, say a particular industries current market competion state? The values on the X-axis is about the values provide by the company to customers? and y-axis is the degree the company invest on it? When I look at the s-canvas of an industry, how i going to interpret it? For example a group of companies in the red oceans etc. I have a lots to clarify with you? We are curently doing a project for the company. But stuck at s-canvas and values. Regards Jerry"

   GS Raina (India) BOS "Rightly said my Enrique. The concept is not new, it only comes with an attractive title. Additionally this can also be referred as the New Market/ Product Entry which drills down from the Gap Analysis. BOS is a good jargon to use."
   Juan (Spain) More of the same? "Note that even if one only mixes certain existing components skillfully, this can still present a valuable contribution to management science. Certainly Kim and Mauborgne have gone beyond merely mixing existing knowledge."
   Zdzislaw (USA) BOS "I am so glad to read responses that recognize that this to be derivative work. It is shamelessly derivative. However, it is obvious that many readers have not neen exposed to the seminal ideas referenced by previous writers so if it helps promote the ideas it serves a useful purpose. It does make a contribution as Juan indicated. My hope is that these types of discussions will motivate people to read the original work by Porter and others."
   Guillermo (Colombia) BOS "It is necessary to study strategic thinking deeply to be able to understand BOS. I recommend Senge on systems dynamics and Morin on complexity. In this way people might be able to understand how deep and meaningful this new and excellent theory represents for strategic management."
   Mamun (Bangladesh) BOS "This world likes innovation and people like to get more new things in this changing world. Here BOS understands the customer as they want to get new things also about the company as they are getting more profit in a compititionless market."
   Dany Sturtewagen (Belgium) BS "There is never anything new in the business world, it all comes down to the fact that we reshuffle the "older" ideas and then, all of the sudden, see the problem and the solution from another perspective. That is what the writers did and therefor deserve credits"
   Sharad /Nimbas (Netherlands) Blue Ocean Strategy and Porter "The whole discussion of BOS is situated around Porter's generic strategy model. Application of that in the pursuit of BHAGs eventually results in to Blue Ocean, isn't it?"
   Randy A (USA) Blue Ocean good reminder "The ideas are not new. Baking your own pie instead of worrying about attaining more of the same pie with your competitiors has many examples of success. Think of the Mac from Apple. Invented their own market called graphics!
That being said, at least it is a good reminder to allow management to put themselves in a position to be able to think differently about their business and how to innovate with products, services or business design."
   Roel (Philippines) Re-hash of Porter's work "I didn't buy this book since i think this is just a rehash of Porter's work. The canvass is very similar to strategic maps. Putting the curves just complicates the case. Stop the hype please."
   Francisco (UK / Brazil) About new and old "I don`t think the book is a revolution or anything. But I think there isn't any problem of building and connecting from other ideas because that has been done for as long as science exists. Sometimes with fanatic results such as the airplane, the steam engine, the relativity theory, etc. Sometimes with good useful results such as 6 Sigma, Blue Ocean, etc etc and sometimes with useless results (that usually, for obvious reasons, do not become famous)."

   james tang (country) blue ocean strategy "absolutely agree"

   Weston (USA) When is a BOS solid? "Thanks Helen. By using the 4 actions framework, you formulate a BOS that meets the following 3 demands for a Blue Ocean Strategy to be valid or strong: FOCUS - The company does not spread its efforts across too many factors in the Strategy Canvas. DIVERGENCE - The value curve of the company stands apart from its competitors. COMPELLING TAGLINE - A strong, authentic and truthfull slogan, which can be easily communicated to the market."
   Majd Elias (Syria) Four Actions framework "Dear Helen, I absolutely agree with you, you are seeing issues differently. Thank you"
   Rob Kempton (USA) Blue Ocean Success by Identifying Customer Goals Early "Certainly the Four Actions Framework is compelling - it's a simple way of getting organizations to re think their offering with structure. I've used it, and it's worked well, and in a brainstorming environment. We tested our outcomes with customers. The strategy canvas is simple, and therefore works! I take more from the market research techniques described. Don't ask your customers frustrations at the point they use your product. Ask you customer goals, at the point they make the decision to enter in your market space. I forget the name, but there was a really strong example of a cinema who learnt that more parents would come out to the cinema, but they can't afford a baby sitter. What made the management and market research firm ask the customer at this point in the decision making? Brilliant vision from that company. Understand your core customer goal, and everyone will achieve a blue ocean eventually. Times are changing. Now is the time to ask."

   Richerd (UK) Blue ocean "Strategically very good elaboration of concept. I do agree with you"


   Fernando Mendes Silva (Portugal) Thank You "I'm doing a MBA and this is very helpful, for a paper that I doing in Strategic Analysis. Every piece of information on this subject is important for me... Thank you"
   Eugene Martinez (Phlippines) Blue Ocean "It's not only creating demand and new opportunities and somehow cushioning the effects of head on competition. It's all about asymmetry - where creating unexpected turns and orientation against your rival. We shape and create opportunities to employ our strength by creating the condition for decisive maneuver. It's fighting smart where you are sure to use your strength by creating that condition for success."
   Colin Downey (New Zealand) BOS on Disney "With a Blue Ocean strategy you may find that disney has only cast their net in shallow water. As a destination for overseas travellors coming into the USA Disney has become less of an attraction and has not had the market focus of other destinations within the USA."
   Saleem Ullah (UK) BOS "I believe to create a Blue Ocean Strategy is the way to be ahead of the game. I'm currently trying to introduce Lean Software Outsourcing in my company (suaju.com) therefore making the use of Outsourcing and Lean Principles and Software in one. "
   Mahmoud Al-Fayyad (Jordan) Strategy of Successive Blue and Red Waves "We may imagine overall strategy as a movement of successive blue and red waves. The entrepreneur will face competition later or sooner. He/she should strive to defend his/her leadership position and BOS. An alternative ROS could be adopted when another competitor defeats him/her. Competitors watch eachother closely. Interior BOS outcomes will be launched and disclosed. These matters are governed by environmental factors."

   Joanne (Canada) Blue / Red Oceans "Blue ocean strategies are the foundation for innovation in highly commoditizing industries; quantifying the value and mitigating the risk of these blue oceans are not limited to known market segments - they are only limited by the ability of the entity to optimize all of its resources."



   Aspen Smith (USA) Blue Ocean Strategy Sandisk "I hate to burst your bubble but the iPod and the iPhone already do that. They use your account info from when you start out with them. Now for some of the apps you do have to connect to a computer because they are too big to download directly to your ipod or iphone. Maybe you could think of a way to improve that."

   Kellie Fuentes (USA) Great! "You are right! If they could make the cars affordable, people will buy them. I would have purchased an eco friendly vehicle if I could have afforded it but I can't afford to pay those prices. People care about the earth we sometimes just can't afford to be Green. It is not cheap being green. Buying Eco friendly, anything costs almost double than the Eco UNfriendly. It's sad. Using recycled materials is a great start for AT&T because it would lower costs for them as well as clean up wastes."



   Roy Wybrow (Australia) BOS in Large competitive traditional markets "BOS is possible if we look at Yellow Tail in wine or the Jet Blue cases. One has to look at the market at a different perspective then test to see if this has viability. Jet Blue took the airline industry and looked at market from consumer experience, Yellow tail looked at wine from perspective of non-wine drinkers. The innovation in such industries is to discover that perspective that returns value."