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Blue Ocean Strategy

What Does it say..

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High growth and profits an organization can generate by creating . New demand in an uncontested market space, or a "Blue Ocean", rather than by competing head-to-head with other suppliers for known customers in an existing industry.
Blue ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored

Aim of Blue Ocean Strategy

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The aim of BOS is not to outperform in the industry but to create a new market space i.e. Blue Ocean

Two Types of Oceans

Red Ocean Blue ocean

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Compete in existing space Beat the competition

Exploit existing demand Align the whole process in strategic choice differentiation/low cost.

Create un-contested space Competition is irrelevant

Create and capture new demand Align the whole process in search differentiation/low cost.

Building Block of Blue Ocean

Value innovation Tipping point Leadership fair process

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Value Innovation
Driving cost down Cost

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Value innovation is a new way of thinking about and executing strategy that results in Blue ocean.

Value

Driving Value up

Buyer Value

Six Principles and Risk Associated

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Formulation Principles Reconstruct Market Boundaries Focus in Big picture Not Numbers Reach beyond existing demand Get the strategic sequence right Evaluation Principles Overcome key organizational Hurdles

Risk
Search risk Planning risk Scale risk Business Model risk

Organizational risk

Build execution into strategy

Management risk

Sequence of Blue Ocean

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1. Get the sequence right

Buyer Utility-Is there exceptional buyer utility in your idea

Yes NO

Re-think

2. Park the idea/re-thinkYes-Go Next

Price- Is your price easily accessible to your buyer

Yes

NO

Cost- Can you attain cost target to achieve at your st. choice

NO

Adoption Hurdles- What are adoption hurdles in actualizing your business ideas

Blue Ocean Strategy

Action Framework
Cost saving by eliminating and reducing cost s that industry competes on

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Reduce Which Factors should be reduced well below industry level;

Eliminate- which factors should be eliminated that industry takes far granted

A new value curve

Raise Which factors should be raised above industry level

Create-Which factors should be created that industry has never offered

Buyer value of lifted by raising and creating elements that industry has never offered.

Profit Model of blue ocean

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It shows how value innovation maximizes profit by using three levels like strategic Price, target cost and pricing innovation
Strategic Price

Target profit

Target Cost

Streamlining and cost innovation

Price Innovation
Partnering

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Examples
Maruti suzuki in India Air Deccan Shaadi.com Tata Motors Micro-max Phone Apple

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