Blue Ocean Strategy

Create Markets and Leave the Competition

Behind
Renée Mauborgne
WOBI © 2012
[@] getab.li/27355
Video:

Rating Take-Aways

8
10 Applicability • Businesses that employ “red ocean strategy” accept their industries’ prevalent strategies
as given and compete for a larger slice of market share of existing markets.
8 Innovation
6 Style • Companies that take a “blue ocean strategy” approach create new, uncontested markets
by extending their reach and appealing to new customers.

• Red ocean companies endeavor to win existing markets through low price or
differentiation. Competition is fierce and profits are limited.
Focus • Blue ocean companies can combine low costs with high differentiation to appeal to
new, untapped market segments.
Leadership & Management
Strategy • The Nintendo Wii exemplifies blue ocean strategy. The Wii created new demand
Sales & Marketing
among large swathes of the population who traditionally didn’t play video games.
Finance
Human Resources
IT, Production & Logistics
Career & Self-Development
Small Business
Economics & Politics
Industries
Global Business
Concepts & Trends

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getabstract

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Review
getabstract
When INSEAD professors Renée Mauborgne and W. Chan Kim released their book, Blue Ocean Strategy, in 2005,
their treatise revolutionized the field of business strategy. While strategy fads tend to drift in and out of fashion,
more than a decade after its first publication, Mauborgne and Kim’s pioneering research remains highly relevant.
In this short vignette, Mauborgne recaps an important element of that original thesis: how market-creating strategy
differs from market-competing strategy. getAbstract recommends her astute analysis to business leaders who are
battle weary from vying for a thin slice of market share and who wish to pursue a fresh approach.
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Summary
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Companies approach market strategy in one of two ways . Most business and governments
pursue a market-competing “red ocean strategy,” which focuses on increasing market share
in established markets where competition is intense, investment is difficult to procure
and margins are slim. Market-creating companies, on the other hand, adopt a “blue ocean
getabstract strategy,” whereby, regardless of what is happening in the broader industry, they develop
“Industry structures
are not given. They are a “new space” that allows business to flourish.
not a product of nature.
They are a product of
our minds. We have Market-creating companies allow the established industry structure to dictate their
created them, and they strategies, and they don’t challenge the status quo. Thus, red ocean firms exhaust their
can be reconstructed in
your favor.”
resources trying to secure a larger proportion of existing customer demand. By contrast,
getabstract market-creating companies use their strategies to shape their business environment. These
blue ocean firms focus on generating entirely new demand, expanding the industry as a
whole. Red ocean strategy takes one of two approaches to competition: Sell at the lowest
cost or be the most differentiated player in the industry. But if you provide a highly
differentiated offering, your costs will be dear and your product less affordable. Whereas
red ocean strategy assumes a trade-off between high differentiation and low cost, blue ocean
strategy argues you can achieve both at once while creating new demand in a manner that
is difficult for competitors to replicate.

The Nintendo Wii exemplifies the blue ocean strategy approach. Video gaming once was
getabstract a highly competitive red ocean industry with multiple players jockeying for market share.
“Blue ocean strategy is
about the alignment of But Nintendo disrupted the industry with the Wii, a differentiated product. Despite being
the value proposition…, produced in Japan and the United States, where labor costs are steep, the Wii has a low price
profit proposition…and
people.”
point. It appeals to new market segments, including elderly people and kids who previously
getabstract opted to play sports ahead of video games. Once upon a time, outdoor advertising also was a
“bloody red” industry, and it suffered small profit margins. Ads were confined to billboards
erected alongside roads and highways. Then came French company JCDecaux , which
employed a blue ocean strategy to dominate the industry. JCDecaux’s advertising can be
found in bus shelters, metro stations and airports in cities around the world. It redefined the
market, enhancing the service and aesthetics of outdoor advertising.
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About the Speaker
getabstract
Renée Mauborgne is co-director of the INSEAD Blue Ocean Strategy Institute. She co-wrote Blue Ocean Strategy.

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