Best in brief: Blue ocean strategy

Rennee Mauborgne and W Chan Kim

Market Leader
Issue 27, Winter 2004

Best In Brief
Blue ocean strategy
W. Chan Kim and Rennee Mauborgne
The business universe could be said to consist of two distinct kinds of space. In red oceans are all the industries we know
today known space. As this red space gets more crowded, competition makes growth and profitability harder to achieve and
products become commodities. Blue oceans denote all the industries not in existence today. Demand is created, not fought
over, and there is ample opportunity for rapid growth and profit.
There are two ways to create blue oceans. In a few cases companies create entirely new industries, such as eBay with online
auctions, but in most cases they are created from within a red ocean by changing the boundaries of an existing industry.
Cirque du Soleil is an good example it changed the boundary separating traditional circus and theatre and became a runaway
success in an industry that has been declining and discredited for many years.
Cirque is one of 150 companies that created blue oceans studied in this report covering 30 industries over 100 years.
Although a new term, blue oceans have always existed. All industries were once new and unheard of, automobiles,
pharmaceuticals,recordedmusicandmanagementconsultancy.Examplesfromthepast30yearsaremutualfunds,cellular
telephones, biotechnology, overnight package delivery, snowboards and home video.
Look forward 20 years and attempt to imagine how many blue ocean new industries will exist and contrast the fortunes with
the over-crowded uncompetitive red ocean industries. Despite this many companies are marooned in red oceans. Of 108 new
business ventures studied, 86% were line extensions and only 14% were new businesses. This small percentage of new
businesses generated 61% of the profit. However, most business strategy is still dominated by red ocean tactics.
How do you create a blue ocean strategic mindset? Blue oceans are not about technological innovation. Leading-edge
technology can be a part of blue ocean creation but it is not a defining feature. The technology was often already present in an
existing industry. Incumbent companies often create blue oceans within their core businesses. Blue oceans can create brands
withdecadesofduration.Companiescreatingblueoceansdonotpursueconventionalcompetitorbenchmarkingorthetrade-
off between value and cost as a source of differentiation.
RedOceanStrategyBlue Ocean Strategy
CompeteinexistingspaceCreateuncontestedspace
Title: Best in brief: Blue ocean strategy
Author(s): Rennee Mauborgne and W Chan Kim
Source: Market Leader
Issue: Issue 27, Winter 2004

Downloaded from warc.com

2
BeatcompetitionCompetitionirrelevant
ExploitexistingdemandCreatenewdemand
Make value/ cost trade-offBreakvalue/costtradeoff
PursuedifferentiationorlowcostPursuedifferentiationandlowcost
Companies that create blue oceans often remain without credible challenge for a decade. The speed and scale of customer
acquisition gives them scale economies which make competition unattractive.
HARVARD BUSINESS REVIEW
'Blue ocean strategy', October 2004 pp.7684







Copyright World Advertising Research Center 2004
Warc Ltd.
85 Newman Street, London, United Kingdom, W1T 3EU
Tel: +44 (0)20 7467 8100, Fax: +(0)20 7467 8101

www.warc.com

All rights reserved including database rights. This electronic file is for the personal use of authorised users based at the subscribing company's office location. It may not be reproduced, posted on intranets, extranets
or the internet, e-mailed, archived or shared electronically either within the purchasers organisation or externally without express written permission from Warc.

Downloaded from warc.com