2. Go where profits and growth
are – and where the
competition isn’t.
3. OCEAN
- is known as the MARKET UNIVERSE.
RED OCEAN
- are all the industries in existence today - the known market
space.
- industry boundaries are defined and accepted, and the
competitive rules of the game are known.
BLUE OCEAN
- uncontested market space for an unknown industry or
innovation
- exists where no firms currently operate, leaving the company to
expand without competition.
4. 1. Is your company facing heightened competition from
domestic and international rivals?
2. Do your sales representatives increasingly argue they
need to offer deeper and deeper price discounts to make
sales?
3. Is your company focused more on cost cutting, quality
control, and brand management at the expense of
growth, innovation, and brand creation?
4. Do you see outsourcing to low cost companies or
countries as a principal prerequisite to regain
competitiveness?
5. Is commoditization of offerings a frequent worry of your
company?
5. RED OCEAN BLUE OCEAN
Compete in existing market Create uncontested market
space space
Beat the competition Make the competition
irrelevant
Exploit existing demand Create and capture new
demand
Make the value‐cost trade‐off Break the value‐cost trade‐off
Align the whole system of a Align the whole system of a
company’s activities with its company’s activities in pursuit
strategic of
choice of differentiation or low differentiation and low cost
cost
6.
7. VALUE INNOVATION
- is the cornerstone of blue ocean strategy.
- is the simultaneous pursuit of differentiation
and low cost.
- focuses on making the competition irrelevant
by creating a leap of value for buyers and for
the company, thereby opening up new and
uncontested market space.
8. REDUCE
Which factors should
be reduced well below
the industry’s
standard?
ELIMINATE
Which of factors A CREATE
that VALUE Which factors should
the industry takes NEW be created that the
for CURVE industry has never
granted should be offered?
eliminated?
RAISE
Which factors should
be raised well above
the industry’s
standard?
9. 1ST TIER: “SOON TO
BE” non customers
who are on the edge
of your market
waiting to jump ship
2ND TIER:
“REFUSING” non
customers who
consciously choose
against your market
3RD TIER:
“UNEXPLORED” non
customers who are in
markets distant from
yours
10. - is closest to your market. They sit on the edge of the
market.
- they are buyers who minimally purchase an
industry’s offering out of necessity but are mentally
noncustomers of the industry. They are waiting to
jump ship and leave the industry as soon as the
opportunity presents itself.
- However, if offered a leap in value, not only would
they stay, but also their frequency of purchases
would multiply, unlocking enormous latent demand.
11. - people who refuse to use your industry’s
offerings.
- buyers who have seen your industry’s
offerings as an option to fulfill their
needs but have voted against them.
12. - is farthest from your market.
- noncustomers who have never thought of
your market’s offerings as an option.
- by focusing on key commonalities across
these noncustomers and existing customers,
companies can understand how to pull them
into their new market.
13.
14. - Ralph Lauren created a blue ocean of ―high fashion with no
fashion‖.
- combined the best features of haute couture (designer
name, elegance of their stores, and fine materials) with the
best features of lower-priced classical lines (classical
look, lower prices) to not only capture share from both strategic
groups, but to also draw new customers into the market.
15. Pfizer created a blue ocean by shifting
the focus of the pharmaceutical industry’s
largely functional orientation — from
medical treatment to lifestyle
enhancement, an emotional orientation.
16. - Cirque Du Soliel created uncontested new market space
that made the competition irrelevant.
- It appealed to a whole new group of customers: adults
and corporate clients prepared to pay a price several
times as great as traditional circuses for an
unprecedented entertainment experience.
- Cirque Du Soleil reinvented the circus.
Editor's Notes
RED --- Here companies try to outperform their rivals to grab a greater share of existing demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities, and cutthroat competition turns the red ocean bloody.
In simple terms, red ocean strategy is about how to out-pace rivals in existing market space; it is a market-competing strategy. In contrast, blue ocean strategy is about how to get out of established market boundaries to leave the competition behind; it is a market-creating strategy. Red ocean strategy assumes that an industry's structural conditions are given and that firms are forced to compete within a finite market space. Taking market structure as given, companies are driven to try to carve out a defensible position against the competition in the existing industry terrain.
Because value to buyers comes from the offering’s utility minus its price, and because value to the company is generated from the offering’s price minus its cost, value innovation is achieved only when the whole system of utility, price and cost is aligned.
To reconstruct buyer value elements in crafting a new value curve, we use the Four Actions Framework. As shown in the diagram above, to break the trade-off between differentiation and low cost and to create a new value curve, there are four key questions to challenge an industry's strategic logic and business model:
