By W Chan Kim and Renee Mauborgne
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Competing in overcrowded industries is no
way to sustain high performance.
The real opportunity is to create blue oceans
of uncontested market space.
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Blue and Red oceans
Blue ocean characteristics
Profit and growth consequences
Why blue ocean is so important for future
companies
Examples
 Check cirque du Soleil.
Two types of oceans:
- Red ocean.
- Blue ocean.
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Ways to create blue ocean:
1- explore completely new industries, as eBay
did with the online auction industry.
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2- from within a red ocean when a company
alters the boundaries of an existing industrythe example of Cirque du.
Blue and Red Oceans
Blue ocean is the engine of growth.
What is The problem with red ocean?
1- commoditization of products
2- price wars
3- declining profit margins
4- differentiating your brands becomes harder
both in economic upturns and in downturns.
The paradox of strategy
-Line extensions 86%- product development
- Creating new markets only 14%.
- The 86% account for 62% of total revenues –
39% of total profit.
- The 14% in new markets delivered 38% of the
total revenues and 61% of total profits.
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Red ocean is about finding an enemy and
make a fight and win the war against your
enemy.
Blue ocean is about doing business where
there is no competitor.
The rhetoric about competitive advantage is
gone.
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Blue ocean is not about technology
innovation.
Incumbents often create blue oceans.
Company and industry are the wrong unit of
analysis
So what is the most appropriate unit of
analysis for explaining the creation of blue
oceans?
 Its the strategic move.
 What is strategic move means?
It is the set of managerial actions and decisions
involved in making a major market creating
business offering- PC servers by Compaq.
Google Earth.
Facebook.
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Creating blue oceans builds brands- brand
equity that lasts. Ford, IBM, Apple, Al Marai,
STC.
So strategy is the secret.
Never use competition as a benchmark
 No trade-off between price and value. Fun
and art of circus – fun of the circus and art of
the theatre.
 The case study here is Cirque Du Soliel and
Ford and may be other examples.
Their strategic move, cost, value and blue
ocean.
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The reconstructionist view versus structuralist
or the environmental determinism
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Aljazeera Vs Al-Arabia southwest airlines.
Fatafeet.
The whole system approach is difficult.
What makes an innovation fails and what
makes an innovation succeeds?
2% succeeds
Where do you think the word strategy is
coming from? It is from militaryFixed piece of land- enemy-
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Fixed demand- fighting for a piece of the
demandAnd you try to fight for a bigger piece and
that is why you find yourself swimming in a
blue ocean.
Zero sum game- one is winning and the other
is losing.
Your mind will start from the total demand,
competitors, market share, fighting. No
creativity and no innovation.
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You get bigger piece and someone else will
get less- what colour is this.
For Strategic growth you need to look for
blue ocean. Because there is fighting over the
growth in red ocean.
http://www.youtube.com/watch?v=zrGOBdV
m-KE
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Strategic logic
Challenge the industry assumptions
Counter trend
Outside the box
Outside the market
That is not the way to do it- inside the
market
Options to think of their value to the buyer or
their cost to the seller –so it is about thinking
and innovating in the process of reducing
cost structure simultaneously with value
maximization for the customer. It is a process
of evaluation and deep thinking about it
 Eliminate
 Reduce
 Raise
 Create
Nintendo has gone outside the market to
appeal to mothers, elderly and adult- based
on why?????
 Think of service station?
Suppose you want to maintain your car.
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Value proposition-for the buyer
Profit propositionPeople structure- what motivates people to
make it a success.
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Increase the size of the market
Focus on non-customers- who are they
Different and low cost
De-segment the market – shared needs.