Assignment 3

Book Summary: Blue Ocean Strategy

Submitted to:
Mushtaq Ahmed
Course Instructor
Institute of Business Administration
University of Dhaka




Submitted by:
Kazi Hirok Al-Arafat
Roll: 92
Batch: 19th (BBA)






Institute of Business Administration, University of Dhaka
March 29, 2014
Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition
Irrelevant
Authors: W. Chan Kim and Rene Mauborgne

Gone are the days of competitor analysis and competitive advantage. The latest buzz in the world of
Branding is Blue Ocean Strategy. The traditional business practice is to engage in cutthroat
competition within existing markets through incremental improvements in cost, quality, or both. This
Red Ocean strategy results in a very competitive environment that leads to very thin profit margins
for surviving in the market. But innovative companies break away from the trend by pursuing value
innovation. Instead of trying to outdo other companies solely based on incremental improvements,
these innovative companies create new market space by looking across currently defined
boundaries in the market. The new market spaces are created by filling the void left by overlooking
the basic needs of a group of customers.

The authors of the book have come up with 2 analytical tools for helping managers find the perfect
blue ocean strategy; the Strategy Canvas and the Four Actions Framework. Using these tools
market spaces can be discovered through creating, reducing, eliminating and raising that results in
a new value curve for the customers. Companies can follow six basic approaches for avoiding
competitive convergence and creating new market space. These are; looking across substitute
industries, across strategic groups, across buyer groups, across complementary products, across the
functional-emotional orientation of the industry, and across time. Examples can be Cirque du Soleil
which completely reinvented the circus business by looking across the conventional boundaries of
buyer groups and substitutes.

In order to develop a blue ocean strategy, management needs to focus on the big picture, not numbers.
Investment in blue ocean strategies should be top priority while delivering only tactical red ocean
moves. And to maximize the size of a companys blue ocean, companies need to concentrate on the
needs of the non-customers. Instead of focusing on customer differences, companies should focus on
the powerful commonalities of what buyers value; in other words, demand aggregation.

The next challenge is to build a robust business model that will help the company harvest healthy
profits from the blue ocean it has created. This brings us to the Sequence of Blue Ocean Strategy,
which is shown in the following diagram.


Fig: The Sequence of Blue Ocean Strategy
Just building a blue ocean strategy will be pointless if there isnt proper implementation of the
strategy. For proper implementation of the strategy, management has to overcome cognitive, political,
motivational, and resource hurdles. Through fair process, management has to include the people in the
front lines in the strategy formulation process. And above all, the company has to go on finding blue
oceans because sooner or later, imitators will come into the market and start competing. We have to
remember that Blue and red oceans have always coexisted and practical reality demands that
companies succeed in both oceans and master the strategies for both.
Moral of the Blue Ocean Story: Continued business growth and sustainability through affordable
value innovation.