“Don’t compete with rivals,
make them irrelevant”
Creating Blue Oceans
Team 3
Andrew Stack, Jessica Sharpless, Andrea Lapotaire,
Andrew West, Taylor Caroll
Cirque du Soleil
 Canadian circus created
in 1984
 Out performed Ringling
Bros. and Barnum &
Bailey
 Achieved in a declining
industry
 But did not compete
with Ringling Bros. and
Barnum & Bailey
 Totem Trailer
Gilles Ste-Croix, Guy Laliberté
New Market Space
 Stop competing with other companies to win in the
future
 Red Oceans- Industries in existence today
 Blue Oceans- Industries not in existence today
 Blue Oceans a uncharted strategy
The Continuing Creation of Blue
Oceans
 Only the term of blue oceans is new
 Industries never stand still
 Why the oceans have been red
The Impact of Creating Blue
Oceans
Business Launch
86%
Revenue Impact
14%
62%
Profit Impact
38%
39%
0%
20%
Launches within red oceans
61%
40%
60%
80%
100%
Launches for creating blue oceans
The Rising Imperative of Creating
Blue Oceans
 Accelerated technological advances shifting supply and
demand causing:
 Accelerated commoditization of products and services
 Increasing price wars
 Shrinking profit margins
 Management will need to become more focused on the
creation of blue oceans
From Company and Industry to
Strategic Move
 How can a company break out of the red ocean and
create a blue ocean?
 Are there lasting companies that are successful in
creating blue oceans?
 “In Search of Excellence”- bestselling book
-Companies in book began to fall from rankings
within 2 years, 2/3 by 5 years
 “Built to Last- Same thing happened, although the
entire lifespan of firms at least 40 years old were
analyzed.
 It was found that these books analyzed industry sector
performance instead of the companies themselves
From Company and Industry to
Strategic Move Cont..
 Example: HP, who met the criteria for “Built to Last,”
did not outperform the market, or even the industry
 Have companies that continuously outperform the
market ever existed?
 Since Cirque du Soleil created a new market space and
has always been successful,
 It is shown that neither the company nor the industry is not
the best unit of analysis
 Strategic moves are the right unit of analysis
 Strategic move: “the set of managerial actions and
decisions involved in making a major market –created
business offering “(10)
Value Innovation: The
Cornerstone of Blue Ocean
Strategy
 Among blue ocean companies with profitable growth,
similarities have appeared:
 Did not use competition as benchmark; used value
innvation
 Value Innovation is the cornerstone of blue ocean
strategy
 Focus on making competition irrelevant
 Creates a leap in value for buyers and your company
 Opens up new and uncontested market space
Value Innovation: The
Cornerstone of Blue Ocean
Strategy Cont…
 Equal emphasis on value and innovation
 Occurs only when companies innovation with utility,
price, and cost positions
 Defies the value-cost trade off
 Blue ocean companies pursue differentiation and low
cost
 Either create a greater value at high cost or reasonable
value at lower cost
 Ex: Cirque du Soleil
Cirque du Soleil
 Paid no attention to what competition did
 “Offered people the fun and thrill of the circus, along
with the intellectual sophistication and artisitic richness
of the theater” (14)
 Gained circus and adult theater customers
 Did not use animals like the traditional circus
 Attracted customers who had discomfort from using
animals
 Saved money
Cirque du Soleil Cont…
 Did away with everything but the tents, clowns, and the
acrobatic acts
 changed humor from slapstick to a more enchanting,
sophisticated style
 Glamorized tent and made more comfortable
 Added a theme and story line
 Multiple productions made people come more
frequently
 Priced tickets against theater ticket prices
Value Innovation
 The figure below depicts the differentiation –low cost
dynamics under-pinning value innovation:
 In creating blue oceans, a company needs to drive costs
down, while driving value up
 Integrates the range of a firm’s functional and operational
activities
 Some innovations can be achieved at subsystem level without
impacting companies overall strategy
 Ex: production innovations
 In value innovation market boundaries and industry structure
are not given
 Allows for reconstruction by industry players-reconstructionist
view
 Ex: Cirque du Soleil
Red Ocean vs Blue Ocean
Formulating and Executing Blue
Ocean Strategy
 Understanding and limiting risk




BOS companies see risk and work around it
Knowledge and market understanding
Keeping current
“no such thing as a riskless strategy”
Implementing BOS
 Many companies still ignore BOS despite the facts
 Playing field unbalanced in favor of analytical tools
 Continuation of Red Oceans of Blue Oceans
The Six Principles of BOS
 Formulation Principle
 Reconstruct market boundaries

Focus on the big picture, not the numbers
 Reach beyond existing demand get
the strategic sequence right
 Execution Principles
Risk factor each principle attenuates
↓
Search risk
↓
Planning risk
↓
Scale risk
↓
Business model risk
Risk factor each principle attenuates
 Overcome key organizational hurdles
↓ Organizatoinal risk
 Build Execution into strategy
↓ Management risk
*Figure 1-4 p. 21 BOS
Sun Cellular
 Mobile communications market (Philippines)
 Market Leaders: Smart and Globe
 Strategy: unlimited text and calls “in network”
AXA Philippines
 French insurace company
 Industry leaders: AIG, SunLIfe, & Insular Life
 Strategy: Partner with Metrobank and offer depositor
insurance
Wal-Mart History
 Sam Walton’s strategy was built on an unshakeable
foundation: The Lowest Prices Anytime, Anywhere
 On July 2, 1962, Sam Walton opened the first Wal-Mart
store in Rogers, Ark.
History Continued
 1971 The first distribution center and Home Office opened in
Bentonville, Ark.
 1980 Wal-Mart reached $1 billion in annual sales, faster than any other
company at that time.
 1988 The first Wal-Mart Supercenter opened in Washington, Mo.,
combining general merchandise and a full-scale supermarket to provide
one-stop shopping convenience.
 1997 The company celebrated its first $100 billion sales year.
 2012 Wal-Mart celebrated 50 years of helping people save money so they
can live better.
The company employs 2.2 million associates worldwide and serves 200
million customers each week at more than 10,000 stores in 27 countries.
Is Wal-Mart a Blue Ocean?
 Wal-Mart is a "Large Discount Retailer."
 The cluster of Target, K-Mart, and Wal-Mart belongs to
the former Blue Ocean Industry of Large Discount
Retailers.
Wal-Mart vs. Target
 Wal-Mart and Target both are discounters, but they
cater to different customers.
 Wal-Mart: customers' average household income ranges
from $30,000 to $60,000,
 Target: customers have a median household income of
$64,000 a year