Let me try to explain this in simple terms for the benefit of everyone. A red ocean strategy ultimately leads to an organization choosing to follow one of two strategies differentiation or low cost. Companies pursue blue ocean strategies to make competition irrelevant. This often requires overcoming an intense level of competition and can often involve the commoditization of the industry where companies are competing mainly on price. Blue ocean businesses create new markets, new demand, and often give the business insulation against competition. Blue ocean strategy and sustainability for strategic management. Using bos to create new market space in sustainability. This blog article takes a look at what kind of roi some companies have achieved by implementing a blue ocean strategy by w.
Canon copier industry case study blue ocean strategy. Value innovation strategy competes in an uncontested market space. The database and research have continued to expand. Most blue oceans are created from within red oceans by expanding existing industry boundaries. Many companies are familiar with the red oceans and feel. But, lets first understand what is blue ocean and how it is different from red ocean strategy.
The companies caught in the red ocean followed a conventional approach, racing to beat the competition. Importance of the blue ocean strategy to a business bizfluent. Michel porter supports to compete in existing market space, beat the competition, exploit existing demand, make the valuecost tradeoff, align the whole. Whichever is chosen the organization must align all activities with one of these strategic directions. In this article you will learn how to make your competition irrelevant and have sales and profit growth in excess of anything you thought was even possible. Blue ocean strategy how to create uncontested market space and. It requires the right research, patience and focus.
A good example is starbucks, which made coffee a form of entertainment and networking, or southwest airlines, that made the problem of flying by economy class a fun and profitable. Chan kim and renee mauborgne is a strategy that challenges companies to distance itself away from fierce competition by establishing uncontested market space that makes existing competition irrelevant. The authors discuss the benefits for business owners to leave the red ocean. This is where everyone would like to be and it is possible for you to have a blue ocean. While they are generally perceived to be more exciting and innovative, there are still major opportunities in traditional red ocean businesses when companies apply rethinking and some adjustments. Sep 24, 2017 blue ocean strategy requires a different mindset.
Just as blue ocean strategy claims that a red ocean strategy does not guarantee success, funky business explained that competitive strategy is the route to nowhere. It is aimed at enriching blue ocean strategy with a case study in. Of the many strategic planning models that exist, the blue ocean strategy could be considered the pacifist of the group. By examining the success elements of 150 companies in over 30 industries, founders of the blue ocean concept realized patterns of strategic thinking in the creation of new market spaces which was the basis for the blue ocean strategy. Firms trying to tap into new markets for growth often fall into the traps of. Blue ocean strategy supports to create uncontested market space. Here are a few examples of blue ocean strategic moves from a variety of different industries and sectors. Align the whole system of a firms activities with its strategic choice of. Achieved via the delivery of features that have a highest marginal benefit to customer needs. History and background a video game console is just a computer that is made only. Red ocean is where many firms compete, where they chase the same customers.
Chan kim and renee mauborgne focused on discovering the common factors that lead to the creation of blue oceans and the key differences that separate those winners from the mere survivors and those adrift in the red ocean. Cirques productions have been seen by more than 150 million spectators in more than 300 cities around the world. Pdf harvard business school press blue ocean strategy rajeh. The greatest example of a red ocean industry would be applications offered from apple, inc. Blue ocean strategy the blue ocean approach is a strategic tool that helps innovation strategists asses current and desired future strategic states whereasred ocean is a current state. Let us say the market that we operate is an ocean cle.
Closing the gap between blue ocean strategy and execution. See comparison between red and blue ocean strategies here in one simple table. Blue ocean strategy is a plan of action aimed at capsizing established offerings with a new offering perceived as several multiples better. Creating any kind of application whether it be a photo editing app, a game application like candy crush, or any of the various categorically odd applications you can find within the iphone app store would be extremely hard to even begin to compete against. A good example of red ocean strategy is the european airline operator ryanair or southwest if you like in the us. Blue ocean strategy can be applied across sectors or businesses. The risks of following a blue ocean strategy the adaptive. This creates a new product offering that doesnt currently exist. Pdf impact of blue ocean strategy on organizational. This strategy revolves around searching for a business in which very few firms operate and where there is no pricing pressure. Click the link above or the picture below to read more. However, blue ocean strategy provides a robust mechanism to mitigate risks and increase the odds of success.
By using the descriptive method and the theories in strategic management, it is clearly visible how the implementation of blue ocean strategy by pt kintetsu world express indonesia can make the. Canon copier industry case study blue ocean strategy example. Blue ocean strategy and its implications for businesses. Its blue ocean strategic move challenged the conventions of the circus industry. These businesses struggle at operating and market differentiation from others. Apple and samsung together dominate the smart phone market today. As a result, they can be viewed as commodity businesses where price is the key differentiation. This post defines blue ocean strategy and explores a few examples while pointing out the five main risks of pivoting in the search for a rich blue sea without competitors. The concept of blue ocean strategy first took the business world by storm in 2005 when authors w. How to create uncontested market space and make the competition irrelevant, a. A final risk of blue ocean strategy is that it can lead companies to oceans that are blue for a very good reason. Back in 2008, i wrote a paper on blue ocean strategy which was published at the international conference on management. They have seen that the trouble lies in managers mental modelsingrained assumptions and.
Upandcoming users of blue ocean strategy are changing industries or product categories burdened by legacy capital costs, stagnant corporate thinking and obvious or latent customer dissatisfaction. Blue ocean strategy how to create uncontested market. Blue ocean strategy can help companies to find new market in which they can. An analytical study of red ocean and blue ocean strategy with. This new market space is created by launching new offerings, with the aim being to make the competition irrelevant so that an organization can grow, uncontested, at least in the beginning. The concept of ideal strategy and its realization using white ocean. One of the reasons why the authors have used the colors red and blue is to describe the market. Blue ocean strategy shift from red oceans to blue oceans. In the future, executives may even describe their competitive strategies using color coding. Please someone tell me some specific companies products or services that are red ocean strategy. Reviewing the blue ocean strategy university of twente student. In a red ocean environment the market becomes more fierce and crowded as competitors try to steal share from each other.
Pdf for creating new demands and open up a new market space the pursuit of. In this article you will learn how to make your competition irrelevant and have sales and profit. The blue ocean strategy offers users a framework for creating uncontested market. Consider some of the well known blue oceans created by the new york police department, southwest airlines, cirque du soleil, casella wine yellowtail, nintendo wii, cemex cement, and the body shop. Instead of dividing up existingand often shrinkingdemand and benchmarking competitors, blue ocean strategy is about growing demand and breaking away from the competition. Blue ocean shift is packed with realworld examples of organizations facing the same constraints we all face be they politics, bureaucracy, or limited resources that applied the very tools and process outlined in the book to shift from competi. The insead blue ocean strategy institute is dedicated to extending the research on blue ocean shift, blue ocean strategy, and blue ocean leadership by chan kim and renee mauborgne and disseminating it to professors, researchers and practitioners around the globe. Blue ocean strategy can help companies to find new market in which they can capture more. It seems that most all of the fortune companies play in red oceans.
How to create uncontested market space and make the competition irrelevant, a book by professors w. Buyer utility the value proposition must provide exceptional utility to the customer. Although established industries red oceans are growing increasingly cluttered, few companies are currently attempting to create new markets. In recent business management literature one of the hot topics discussed is how to. By focusing on strategies of competition in established industries, companies and researchers have overlooked the value of creating new market spaces where there are no competitors. Looking at these launches gives a lot of insight into how these two companies think, and the way they compete. A blue ocean strategy is based on creating demand that is not currently in existence, rather than fighting over it with other companies. Based on an eponymously titled book, this strategy argues that cutthroat competition results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool. The concept of blue ocean strategies is new in the business world as it was. Blue ocean strategy challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant. In short, avoid headtohead competition and focus on innovation. Pdf blue ocean strategy for creating value of the organization. Impact of blue ocean strategy on organizational performance. Cell phones, and particularly smart phones manufacturers, are in red oceans.
Blue ocean strategy is where a company creates a completely new market space or market category. By that we can see that there is a lot of interest by the business. The diagram below shows the difference between the red ocean. For this strategy, the key goals are to beat the competition and exploit existing demand. The authors of the bestselling blue ocean strategy have spent over a decade exploring that question. Apr 02, 2015 surface 3 and apple watch red oceans v blue oceans strategy. Kim and mauborgne established the sequence of blue ocean strategy, as the name states, to guide companies in the development and implementation. Blue ocean strategy and sustainability for strategic. Ideal strategy, red ocean strategy, blue ocean strategy, black ocean strategy, white ocean strategy, comparison of different strategies, characteristics of white ocean strategy.
The greatest example of a red ocean industry would be. What consistently separated winners from losers in creating blue oceans was their approach to strategy. For example, competing factors in blue ocean strategy are similar to the definition of finite and infinite dimensions in funky business. The authors suggest that there are many ways to create blue oceans. Companies should instead look for new market space and ways to reinvent the industry. We will introduce the aspects of red ocean strategies that most of the companies use around the world, and then we will compare the advantages and disadvantages of using blue ocean strategies. Discussion blue ocean strategy versus red ocean strategy every blue ocean company would ultimately reach to the level of red ocean category as. You must keep in mind that there is a deeper potential of the marketplace that hasnt been explored yet. Student questions i need company who is in red ocean. What are some successful examples of blue ocean strategy. This blog article takes a look at what kind of roi some companies have achieved by implementing a blue. Apr 30, 2016 red ocean strategy is a strategy which aims to fight and thrash the competition. This blog article is a overview of some of the key points of the book by w.
This post defines blue ocean strategy and explores a few examples while pointing out the five main risks of pivoting in the search for a. This strategy, which is based on extensive research of hundreds of companies spanning across decades and including several industries, proclaims that instead of battling competitors, companies can create new markets for themselves. In less than twenty years since its creation, cirque du soleil achieved a level of revenues that took ringling bros. Blue ocean strategy is a concept that has been pioneered by insead professors, w. To understand red ocean strategy let us begin by defining blue ocean strategy. Introduction strategic planning and decision making are important in organizations using business. To escape this red ocean cycle, with intense and direct competition, some companies have created lucrative new operations using the blue ocean strategy. Munich personal repec archive the concept of ideal strategy and its realization using white ocean mixed strategy. They have margin issues, problems with customer retention, growth problems, and are basically stuck in a rut.
The mental models that undermine marketcreating strategies. Blue ocean strategy, weve had conversations with many managers involved in executing. In red ocean strategy, companies develop a plan to knock outor killthe competition, leaving the market stained red with the blood of. In red ocean companies try to surpass their rivals to take hold of a greater share of existing demand. Blue ocean strategy including examples and pdf download. Pdf on oct 10, 2016, safak gunduz and others published how to make blue. Blue ocean strategy pushes companies to create new industries and break away from the competition. Surface 3 and apple watch red oceans v blue oceans strategy. Chan kim and renee mauborgne wrote a bestselling book, blue ocean strategy, which has been translated into 43 languages. Red ocean strategy aligns the whole system of the company and its activities with its strategic choice of differentiation and. These systems started to gain popularity in the 1970s with consoles that played only pong. But in most cases, a blue ocean is cre ated from within a red ocean when a company. Blue ocean strategy challenges companies to break out of the red ocean of bloody competition by. This is a complete contrast to conventional red ocean strategies because instead of analysing competitors, and try out perform them, blue ocean strategy encourage companies to differentiate or break away from the existing market space, hence making competition irrelevant.
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