Blue Ocean Strategy

--Submitted by: Priyanka Selukar Ebiz Batch-I Roll No: 37

 In an established industry, companies compete with each other for every piece of available market share. The competition is often so intense that some firms cannot sustain themselves and stop operating. This type of industry describes a Red ocean, representing saturated market share, bloodied by competition. To avoid costly competition, firms can innovate or expand in the hope of finding A Blue ocean. A blue ocean exists where no firms currently operate, leaving the company to expand without competition.

 Blue Ocean Strategy is: " a creative battle where the players of a particular segment dont compete with each other remaining in the same market space; instead explore, create and acquire new market spaces by dealing with new demand through the principle of 'value innovation '." While the Red Ocean Strategy is " a head to head battle where the players of a particular segment compete with each other remaining in the same market space i.e. within the boundaries of the same industry on the principle of 'competitive advantage'."

Value Innovation: The Cornerstone of Blue Ocean Strategy

"Value innovation is created in the region where a company's actions favorably affect both its cost structure and its value proposition to buyers. Cost savings are made by eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in due to the high sales volumes that superior value generates."

Value Innovation: The Cornerstone of Blue Ocean Strategy Source: Kim & Mauborgne (2005), Blue Ocean Strategy.

Six principals of Blue Ocean Strategy

1) Reconstruct Market Boundaries

Execution at IKEA

Leisure activity The IKEA restaurant

Wide range of products

Environment-friendly 2) Reach Beyond Existing Demand Well-designed furniture Experience room Freedom to touch The IKEA restaurant

Six principals of Blue Ocean Strategy

Execution at IKEA

3)Build Execution into Strategy

Engagement Trust bulit relationship Togetherness and enthusiasm

4)Overcome Key Organizational Hurdles

Motivation Desire for challenge

Six principals of Blue Ocean Strategy

Execution at IKEA

5) Get the Strategic Sequence Right 6)Focus on the Big Picture, not the Number

Strategic pricing making method Focus on long-term development

IKEA: Blue Ocean Strategy Implementation

 IKEAs competitive strategy is Blue Ocean strategy, which led IKEA create leading position in local furniture industry. IKEA has been successful in Nanjing by implementing a Blue Ocean strategy that is crucially supported by good value innovation.