Go where profits and growth
are – and where the
competition isn’t.
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.
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 BLUE OCEAN
Compete 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 a
company’s activities with its
strategic
choice of differentiation or low
cost
Align the whole system of a
company’s activities in pursuit
of
differentiation and low cost
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.
REDUCEWhich factors should
be reduced well below
the industry’s
standard?
CREATEWhich factors should
be created that the
industry has never
offered?
ELIMINATEWhich of factors
that
the industry takes
for
granted should be
eliminated?RAISE
Which factors should
be raised well above
the industry’s
standard?
A
VALUE
NEW
CURVE
1ST TIER: “SOON TO
BE” non customers
who are on the edge
of your market
waiting to jump ship2ND TIER:
“REFUSING” non
customers who
consciously choose
against your market
3RD TIER:
“UNEXPLORED” non
customers who are in
markets distant from
yours
- 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.
- 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.
- 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.
- 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.
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.
- 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.