Definition

A slang term for the uncontested market space for an unknown

industry or innovation, W. Chan Kim and Renee (2005)

Blue ocean strategy describes how organizations should try and find a
way to work in a marketplace that isn't bloodied by the competition
and is free of competitors.

Introduce the concept of Blue Ocean Strategy (BOS) and Red Ocean
Strategy (ROS)


About the Founders: Kim & Mauborgne
W. Chan Kim

The Boston Consulting Group
Bruce D. Henderson Chair &
Professor of Strategy and
International Management-INSEAD
Rene Mauborgne

The INSEAD Distinguished
Fellow & Professor of Strategy
and International Management
Red Ocean Blue Ocean
VS
Red Ocean
Compete in existing market place
Tries to beat the competition
Exploit existing demand
Value cost trade off
Differentiation or cost
Red Ocean Industries
Automobile Industry
Banking Industry
Telecommunication Industry
Blue Ocean
Create uncontested market space
Make competition irrelevant
Break value cost trade off
Differentiation and low cost
Blue Ocean Industries
Why Blue Ocean Strategy is
chosen over Red Ocean
strategy ?
Avoid price wars
Globalization
Shrinking profit margins
Brands are becoming more similar
Reach Beyond
Existing Demand
go for uncontested space
Reconstruct Market
Boundaries
overcome believes
Get the Strategic
Sequence Right
value [innovation] first.
VI VI
COST
VALUE
Blue Ocean Strategy: The Core
Principles
Blue Ocean Strategy: Reconstruct Market Boundaries
Industry
Focuses on rivals within its
industry
Strategic Group
Focuses on competitive position
within strategic group
Buyer Group
Focuses on better serving the
buyer group
Scope of Product and
Service Offerings
Focuses on maximizing the value
of product and service offerings
within the bounds of its industry
Functional-emotional
Orientation of an
Industry
Focuses on improving price-
performance with the functional-
emotional orientation of this
industry
Time/Trends
Focuses on adapting to external
trends as they occur
Looks across alternative
industries
Looks across strategic groups
within its industry
Redefines the buyer group of the
industry
Looks across to complementary
product and service offerings that
go beyond the bounds of its
industry
Rethinks the functional-emotional
orientation of its industry
Participation in shaping external
trends over time
Boundaries of
Competition
Head-to-Head
Competition
Creating
New Market Space
Blue Ocean Strategy: Reach Beyond Existing Demand
Core Customer Noncostumer
Soon-to-be-NC Refusing Customer
Blue Ocean Strategy: Get the Strategic Sequence right
Buyer utility
Is there exceptional buyer
utility in your business idea?
Adoption
What are the adoption hurdles in
actualizing your business idea?
Are you addressing them up
front?
Price
Is your price easily accessible to
the mass of buyers?
Cost
Can you attain your cost target to
profit at your strategic price?
A Commercially Viable Blue Ocean Strategy!!
YES
YES
YES
YES
No Rethink
No Rethink
No Rethink
No Rethink
Blue Ocean Strategy
Tools
Value Innovation

Example : Cirque du Soleil
Other circuses focused on:
Benchmarking the competition
High-profile stars, which increased costs but who were largely
unknown to the general public
Traditional venue
Traditional audiences



6
BOS
PRINCIPLES
Formulation
Principles
Reach beyond
existing demand
Reconstruct
market boundaries
Focus on the big
picture, not the
numbers
Get the strategic
sequence right
Execution Principles
Overcome key
organizational
hurdles
Build execution
strategy
The Strategy Canvas
Captures the factors that competitor focuses on.
Each factor is plotted on the canvas, with scores
reflecting the level of investment a specific company
makes in that factor
To differentiate yourself in the market place, you must
focus on alternatives and non-customers to re-define
the marketplace
Possible Wine Canvas
0
2
4
6
8
10
12
P
r
i
c
e
I
m
a
g
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a
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c
o
m
p
l
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x
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t
y
p
r
e
s
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i
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s
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p
o
r
t
f
o
l
i
o
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a
s
y

t
o

d
r
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k
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s
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F
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Competetive Factors
R
a
n
k
i
n
g

S
c
a
l
e
Quails Gate
Mission Hill
Yellowtail
Example: Yellow Tail wine
What factors should
be eliminated that
the industry has taken
for granted?
Eliminate
What factors should
be reduced well
below the industry
standard?
Reduce
What factors should be
created that the
industry has never
offered?
Create
What factors should
be raised well beyond
the industry
standard?
Raise
4 Actions
To Create Blue Ocean
Criticism Of
BOS
Ignore relevant competitions
Competencies mismatch
Possibilities of zero result
Case Study
The Case of Cirque du Soleil
Cirque du Soleil achieved rapid growth in a declining industry with
low profit potential
Instead of simply trying to outpace the competition, Cirque du Soleil
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
and noncustomers
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


Eliminate-Reduce-Raise-Create
Eliminate
Star Performers
Animal shows
Aisle concession sales
Multiple show arenas
Raise
Unique venues
Reduce
Fun and humor
Thrill and danger
Create
Theme
Refined environment
Multiple productions
Artistic music and dance
The Strategy Canvas
of Cirque du Soleil
hi
o
f
f
e
r
i
n
g

l
e
v
e
l

lo
Price
Fun & Humor Unique Venue Aisle Concessions
Multiple Show
Arenas
Thrills & Danger
Animal Shows
Star Performers
Theme
Refined Viewing
Environment
Multiple
Productions
Artistic Music
& Dance
Cirque du Soleil
Reduce Eliminate Raise Create
Kim & Mauborgne 2006
Ringling Brothers
Smaller Regional Circus
Case Study
Case Study 2: Malaysias National Blue
Ocean Strategy (NBOS)

1MALAYSIA TRAINING CENTRE PUBLIC SERVICE
Rural Transformation Centre (RTC)
COMMUNITY
TRANSFORMATION
1Malaysia for Youth (iM4U)
WOMEN, YOUTH, &
FAMILY
A joint military-police programme (by PM in 2010) SAFETY & SECURITY
Micro PPP Programme ENTREPRENEURSHIP