Blue Ocean Strategy and its Implications for Businesses

Introduction
Blue Ocean Strategy is a concept that has been pioneered by INSEAD Professors, W. Chan Kim, and
Renee Mauborgne. This strategy, which is based on extensive research of hundreds of companies
spanning across decades and including several industries, proclaims that instead of battling competitors,
companies can create new markets for themselves. In other words, as opposed to Red Oceans that are
saturated markets where differentiation or cost competition is prevalent, companies can instead create
Blue Oceans or entirely new markets for themselves through value innovation, which would create value
for its entire stakeholder chain including employees, customers, and suppliers. The key premise of the
Blue Ocean strategy is that companies must unlock new demand and make the competition irrelevant
instead of going down the beaten track and focusing on saturated markets.

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Blue Ocean Strategy and its Implications for Businesses

Blue Ocean vs. Red Ocean

If we compare the Blue Ocean with the Red Ocean we find that whereas the former denotes
all the industries not in existence now and hence, are potential opportunities for companies
to enter and unlock demand, the latter denotes the existing industries and the known market
space, which is characterized by reduced profits and growth because of saturation. This
results in the Commodification of products, which means that the intense and cutthroat
competition in the existing markets turns them bloody, or makes the ocean red. On the other
hand, Blue Oceans represent many opportunities for growth and where the irrelevance of
competition is the norm because the markets are yet to be saturated.

Red Ocean: In a red ocean, companies compete within existing market spaces, battling for
market share, customers, and profits. The competition is intense, often resulting in a "bloody"
marketplace.
Blue Ocean: In contrast, a blue ocean refers to untapped, uncontested market spaces. By
creating a blue ocean, companies can avoid direct competition and carve out a unique
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position for themselves.
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Blue Ocean Strategy and its Implications for Businesses

Further, Blue Oceans represent markets where

demand is large and unmet and where growth and
profits can be actualized through value innovation,
which is the simultaneous pursuit of low
differentiation and low cost. Indeed, the cornerstone
of the Blue Ocean Strategy is the creation of new
playing fields and which entails opening up entirely
new markets as opposed to the Red Ocean where the
existing market conditions are such that companies
must pursue either differentiation or low cost
strategies.

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Blue Ocean Strategy and its Implications for Businesses

In other words, Blue Ocean strategy

represents a game changing idea of creating
new markets and unlocking the inherent
demand in these markets. Whereas Red
Oceans are all about battling the competition,
Blue Oceans are all about making the
competition irrelevant.

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The Six Principles of Blue Ocean
Strategy

1. Reconstruct Market Boundaries: This

principle involves redefining industry
boundaries and creating new market
spaces. Examples include Cirque du
Soleil, which transformed the circus
industry by combining elements of
circus and theater to target adult
audiences.
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1. Focus on the Big Picture, Not the Numbers: Rather than
obsessing over existing market data, companies following
the Blue Ocean Strategy focus on creating new demand
through value innovation. Examples include Nintendo Wii,
which expanded the gaming market by targeting casual
and family-oriented gamers with motion-sensing
controllers, and Rayan Air Airlines, which challenged the
conventional airline industry by prioritizing low-cost
travel and customer service.

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u 3.Reach Beyond Existing Demand: This principle
emphasizes the importance of appealing to non-
customers and expanding the customer base.
Starbucks, for instance, not only targeted coffee
enthusiasts but also introduced an inviting ambiance
and comfortable spaces, attracting non-coffee
drinkers. Apple iPod reached beyond the existing
market of MP3 players by offering a user-friendly
interface and seamless integration with iTunes.
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u 4. Get the Strategic Sequence Right: This principle involves
identifying and implementing the right sequence of
strategic actions to successfully create a blue ocean.
Amazon prime video disrupted the video rental industry by
transitioning from physical rentals to online streaming,
becoming a dominant player in the streaming market.
Uber, similarly, revolutionized the transportation industry
by focusing on convenience and ease of use through their
ride-hailing app.

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u 5. Overcome Key Organizational Hurdles: This principle
emphasizes the need to address internal challenges and
align the organization with the Blue Ocean Strategy. Zara,
a fashion retailer, overcame traditional industry hurdles
by implementing a fast-fashion model with short
production cycles and responsive inventory management.
Tesla disrupted the automotive industry by overcoming
technological and logistical challenges associated with
electric vehicles and establishing a direct sales model.

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u 6. Build Execution into Strategy: Successful execution of the
Blue Ocean Strategy requires integrating execution
capabilities into the strategic planning process. IKEA, known
for affordable furniture with self-assembly, focuses on
efficient supply chains, flat packaging, and in-store layouts
that encourage self-service. Tesla's execution of the strategy
includes vertically integrating its manufacturing process,
developing a proprietary charging network, and investing in
cutting-edge technology for electric vehicles.

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Blue Ocean Strategy and its Implications for Businesses
For instance, the authors provide the example of the Canadian Circus Company,
Cirque du Soleil which came up with a game changing business model in the
1980s and which resulted in the altering of the dynamics of the circus industry.
The Five Forces model when applied to the circus industry predicted that it was
doomed to failure because of high power of suppliers, and the increase in the
alternative forms of entertainment that were eating into the market share of the
circus industry.

Further, concerns and pressure from animal rights groups and increased
awareness of the customers about the consequences of conventional circuses
were beginning to spell trouble for the circus industry. Therefore, the Five
Forces model of Porter when applied to this industry predicted a slow death for
it.
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Blue Ocean Strategy and its Implications for
Businesses
However, Cirque du Soleil followed what can be called a
Blue Ocean strategy wherein it replaced the animals and
reduced the importance of individual stars and created an
entirely new business model based on a combination of
music, dance, and athletic shows to innovate and create
value for itself.
In other words, what this means is that instead of tweaking
the existing strategies, Cirque du Soleil went in for an
entirely new strategy of creating a new market altogether
by redefining its core competencies and taking “Four
Actions” which would be described in the next section. 12
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Blue Ocean Strategy and its Implications for
Businesses
Examples of Blue Ocean Strategy in Practice
The authors of the Blue Ocean concept insist that
their strategy is different from Porter’s Five Forces,
which they reckon is all about battling the sharks in
the red oceans. Further, they point to the fact that
Red Ocean competition is characterized by merciless
competition whereas Blue Ocean represents the
redefinition of the terms of competition where one
can have the ocean all to oneself and therefore, the
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waters are blue. Inspire Presentation 13

Case Study
Unique Case study of Nintendo Wii
. Expanded the gaming market beyond hardcore gamers.

Introduced motion-sensing controllers, making gaming more

intuitive and accessible to casual and family-oriented
gamers.
Targeted a new market segment and created a blue ocean
by providing a unique gaming experience.
Enjoyed significant success with widespread adoption and
market dominance during its release
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Blue Ocean Strategy and its Implications for Businesses
Examples of Blue Ocean Strategy in Practice
The authors of the Blue Ocean concept insist that their strategy is different from Porter’s Five Forces, which
they reckon is all about battling the sharks in the red oceans. Further, they point to the fact that Red Ocean
competition is characterized by merciless competition whereas Blue Ocean represents the redefinition of
the terms of competition where one can have the ocean all to oneself and therefore, the waters are blue.

For instance, the authors provide the example of the Canadian Circus Company, Cirque du Soleil which
came up with a game changing business model in the 1980s and which resulted in the altering of the
dynamics of the circus industry. The Five Forces model when applied to the circus industry predicted that it
was doomed to failure because of high power of suppliers, and the increase in the alternative forms of
entertainment that were eating into the market share of the circus industry. Further, concerns and pressure
from animal rights groups and increased awareness of the customers about the consequences of
conventional circuses were beginning to spell trouble for the circus industry. Therefore, the Five Forces
model of Porter when applied to this industry predicted a slow death for it.

However, Cirque du Soleil followed what can be called a Blue Ocean strategy wherein it replaced the
animals and reduced the importance of individual stars and created an entirely new business model based
on a combination of music, dance, and athletic shows to innovate and create value for itself. In other
words, what this means is that instead of tweaking the existing strategies, Cirque15du Soleil went in for an
entirely new strategy of creating a new marketInspire
altogether
Presentation by redefining its core competencies and taking
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Blue Ocean Strategy and its Implications for Businesses

Conclusion
The example of the Blue Ocean strategy described above is clearly indicates that Cirque du Soleil did not
try to battle the competition but instead, created an entirely new market for itself. In short, this is the
essence of the Blue Ocean Strategy that hinges on creating value and taking it to the next level by a game
changing approach to competition. In conclusion, once a company actualizes the Blue Ocean Strategy, it
usually results in opening up new markets instead of stagnating in the existing markets.

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