BLUE OCEAN

STRATEGYOrbeta, Jennifer

Ivy

BLUE OCEAN STRATEGY

Go where profits and growth are – and where the competition isn’t.

DEFINITION OF TERMSOCEAN- 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.

HOW BLUE IS YOUR OCEAN?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?

RED OCEAN VS BLUE OCEAN

RED OCEAN BLUE OCEANCompete in existing market space

Create uncontested market 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 acompany’s activities with its strategicchoice of differentiation or low cost

Align the whole system of acompany’s activities in pursuit ofdifferentiation and low cost

BLUE OCEAN STRATEGY TOOLS

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.

FOUR ACTIONS FRAMEWORKREDUCEWhich factors shouldbe reduced well belowthe industry’s standard?

CREATEWhich factors shouldbe created that theindustry has neveroffered?

ELIMINATE

Which of factors thatthe industry takes forgranted should beeliminated?

RAISEWhich factors shouldbe raised well abovethe industry’sstandard?

A VALUE NEW

CURVE

3 TIERS OF NON-CUSTOMERS

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

TIER 1: SOON TO BE NON CUSTOMERS

- 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.

TIER 2: REFUSING NON CUSTOMERS

- 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.

TIER 3: UNEXPLORED NON CUSTOMERS

- 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.

BLUE OCEAN STRATEGY MOVES

RALPH LAUREN

RECONSTRUCTING MARKET BOUNDARIES

- 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.

VIAGRA CHALLENGING THE INDUSTRY’S

FOCUS

Pfizer created a blue ocean by shifting the focus of the pharmaceutical industry’s largely functional orientation — frommedical treatment to lifestyle enhancement, an emotional orientation.

CIRQUE DU SOLEIL CREATING A BLUE OCEAN

- 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.

THANK YOU!