Blue Ocean Strategy

Red Oceans

• Compete in existing market space.

• Beat the competition.

• Exploit existing demand.

• Make the value-cost trade-off.

• Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost.

• Create uncontested market space.

• Make the competition irrelevant.

• Create and capture new demand.

• Break the value-cost trade-off.

• Align the whole system of a firm’s activities in pursuit of differentiation and low cost.

Blue Oceans

• Which is its target market?

• What does it offer?

Restaurant “Campestre”

Campestre• Kind waiters• Cruzcampo beer• Big dishes• Meat• Guard in the parking• Childs park

Competitors• Refined waiters• Amstel beer• Barbeque• Meat and fried fish• Menu for kids• Clown

• Low differentiacion in products and servicess• Same target market• Limited market• Low margin• High costs• Difficult business!

Our restaurant works in a Red Ocean

Strategic Canvas

Campestre• Kind waiters• Cruzcampo beer• Big dishes• Meat• Half dishes• Security guard in the

parking• Child park

Competitors• Refined waiters• Amstel• Barbecue• Meat and fried fish• Menu for kids• Clown

Competing inside

Creatingvalue

through

Industry

Strategic Groups

Buyer Groups

Products & Services

Functional/Emotional Orientation

Time

New value

Reduce

Create

Raise

Eliminate

• Reach beyond existing demand.o Soon-to-be non customers.o Refusing non customerso Unexplored customers

• Focus on the big picture, not the numbers.

Principles

New value curve

Alternate Industries

Strategic Groups

Distribution Channel

Comple-mentary scope of

products & services

Funcional Emotional

Orientation

Time

6 pathways

• Alternatives include products or services that have different functions and form but the same purpose.

Restaurants & Cinemas

• Common aim: To enjoy being out at night.

1. Exploring alternate industries

• Aviation customers:o Executives

• Alternatives:o Commercial Airline. Business Classo Corporate Jet

• Why should companies choose one of them?

• Netjets: Divides planes ownership.

Price

Need for c

ustomers

to manage airc

raft

Deadhead costs

Speed of total tr

avel time

Ease of travel

Flexibilit

y

In-flight service

Netjets Private jet Commercial airlines

• Flexibility

• Reduction on trip lenght.

• Without a hitch

• Convenience

• Strategic pricing policy

• Most companies focus on improving their competitive position inside one strategic group:o Luxury cars: Mercedes Benz, BMW, Jaguaro Economy cars: Ford, Renault,…

• Key to find a Blue Ocean. To understand the reasons and the key factors that would make a customer to move from one strategic group to another.

2. Strategic groups

Industry

Traditional Health Clubs

• Full range exercises and sporting options

Home exercise

• Low cost• Privacy

• Expensive• Not easily accessible• Lack of privacy

• Low Motivation

• Why do women choose Health clubs or home exercise?Eliminate Raise

• Non threatening same sex environment

Reduce Create

• Price• Amenities• Equipment• Availability of instructors

• Womanly fun atmosphere

• There is a chain of “buyers” who are directly or indirectly involved in the buying decision:o Purchaserso Userso Influencers

3. Analizing distribution channel

Focused in the influencers: Doctors

Competition is based on Insulin pureness

4. Complementary scope of Products and Services

• Think about what happens before, during and after your product/service is used.

Buses industry:

• Buses made from Steel.

• Competition is based on price.

• Characteristicso Old fashion designso Low quality

• What happens before, during and after the product is used?o Maintenance costs.o High fuel consumptiono Very heavy, so its components have short live.o No environmental friendliness

• Nabi thought about a global solution: Buses made from fibre glass

o Maintenance costs reduction to do corrosion.o More quick, cheaper and easier repairs.o Less fuel.o Less production costso More space.

• Japanese barberries:o Hot towelso Massageo Coffee, teao Special hair and skin treatmentso Washing and drying hair.o Shavingo Queueing upo $ 27 – 45

5. Emotional/Functional

Pricey

Extras

Feelings

• What about professionals and executives?o Air washo Time reductiono No queuingo Price: $9o Income/barber increased

• Mexico. Self-construction represent 85% total market demand.

• But really, few families invested in enlarging their hose.

• They prefered to spend their money in the village feasts, 15th birthday celebrations, weddings and so on.

Patrimonio Hoy

5. Time

•Which alternative do your customer have?

•Why some customers choose them?

Alternate industries•Whic

h are the strategic groups in your Industry?

•Why customers choose the upper or the bottom group?

Strategic groups

•Analize your industry’s customer chain

•Which group is your Industry focused on?

•I you changed your customer targe, how could you add value?

Distribution channels

•What happens before, during and after using your product/service?

•Could you identify pains?

•How could you erase those pains offering complementary products/services?

Complementary scope of

products and services

•Your industry compete in an functional or emotional basis?

•If you compete based in emotional appeal, which elements could be eliminated to have a functional appeal?

•If you compete based in functional appeal, which elements could be added to have a emotional appeal?

Functional / emotional

Orientation

•Which trends can affect your industry?

•What impact would they have in you Industry?

•Bear this in mind, how could you create products/servicies new for your customers?

Time