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Creating uncontested market spaceCreating uncontested market spaceand make the competition irrelevantand make the competition irrelevant
Presented By:
Muhammad Nasir
Hamid Bilal
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About theAbout the : Chan & Renee: Chan & Renee
W. Chan Kim
• The Boston Consulting Group
Bruce D. Henderson Chair
Professor of Strategy andInternational Management
Renée Mauborgne
• The INSEAD DistinguishedFellow and Professor of Strategy
and International Management
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Red Ocean
Compete in
crowded
markets
Blue Ocean
Create and
capture new
market space
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Red Ocean Strategy Blue Ocean Strategy
Compete in existing marketspace.
Create uncontested marketspace.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture newdemand.
Make the value-cost trade-off. Break the value-cost trade-off.
Align the whole system of astrategic firm's activities with itschoice of differentiation or lowcost.
Align the whole system of afirm's activities in pursuit of differentiation and low cost.
VALUE INNOVATION
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Creating Blue OceansCreating Blue Oceans
• Two types of markets:Two types of markets:
– Red Oceans – all industries in existenceRed Oceans – all industries in existencetoday (known market space)today (known market space)
– Blue Oceans – all industries not inBlue Oceans – all industries not inexistence today (unknown marketexistence today (unknown market
space)space)
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The phraseThe phrase “Blue oceans” “Blue oceans” is new, but theis new, but theconcept is not. Think of what industriesconcept is not. Think of what industries
existed in 1900.existed in 1900.
ExampleExample
Ford T-modelFord T-model• Value pioneering Value pioneering
• Turning unattractive industry into an attractive oneTurning unattractive industry into an attractive one
• Use of existing technology – no R&D costs, just strategic thinkingUse of existing technology – no R&D costs, just strategic thinking
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1.1. Create new IndustryCreate new Industry
2.2. Create from existing ‘Red Ocean’ Create from existing ‘Red Ocean’
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The rising Imperative of Creating BlueThe rising Imperative of Creating Blue
OceansOceans
• Supply exceeds demandSupply exceeds demand
• Products turning into commoditiesProducts turning into commodities
• Increasing price warsIncreasing price wars
• Shrinking profit marginsShrinking profit margins
• Brands are becoming more similar Brands are becoming more similar
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The Profit and GrowthThe Profit and Growth
Consequences of Blue OceansConsequences of Blue Oceans
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is the “new” strategic logicis the “new” strategic logic
behindbehind Blue OceanBlue Ocean Strategy.Strategy.
Instead of focussing on beating the competition,Instead of focussing on beating the competition,
you focus onyou focus on making it irrelevant making it irrelevant by creating aby creating a
leap in value for buyers and creatingleap in value for buyers and creating
uncontested market space.uncontested market space.
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• Differentiation and Low Cost Leadership isDifferentiation and Low Cost Leadership is
achieved simultaneouslyachieved simultaneously
• Safe barrier of imitation for 10 to 15 yearsSafe barrier of imitation for 10 to 15 years
2 Advantages of Blue Ocean2 Advantages of Blue Ocean
StrategyStrategy
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Graph of Value InnovationGraph of Value Innovation
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UtilityCreate new
buyer
utilities
PriceSet a price that
attracts a mass
of buyers
CostSet the structure
based on a
target
Value Innovation
Unlocking non-customer Unlocking non-customer
demanddemand
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The Case of Cirque du SoleilThe Case of Cirque du Soleil
• Cirque was founded in 1884 and group of Cirque was founded in 1884 and group of
street performers and entertainers.street performers and entertainers.
achieved rapid growth in a decliningachieved rapid growth in a decliningindustry with low profit potential.industry with low profit potential.
• At decline due to alternate mode of At decline due to alternate mode of
entertainment, Video Games such as playentertainment, Video Games such as playstations, TV entertainment etcstations, TV entertainment etc
• Animal Rights Animal Rights
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Cirque-ExampleCirque-Example
• Cirque created uncontested new marketCirque created uncontested new market
space that made the competitionspace that made the competition
irrelevantirrelevant• It created blue ocean from read ocean byIt created blue ocean from read ocean by
creating theater, opera and ballet forcreating theater, opera and ballet for
adults and corporate clients who wereadults and corporate clients who weretraditionally non customers.traditionally non customers.
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Example: CirqueExample: Cirque
• Instead of simply trying to outpace theInstead of simply trying to outpace the
competition, Cirque offered people bothcompetition, Cirque offered people both
the fun and thrill of the circus and thethe fun and thrill of the circus and theintellectual sophistication of the theaterintellectual sophistication of the theater
• Because of this, Cirque du Soleil appealedBecause of this, Cirque du Soleil appealed
to both circus customers (Children) andto both circus customers (Children) andnoncustomers (Adults)noncustomers (Adults)
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Example: CirqueExample: Cirque
• Each show, like a theater production, hadEach show, like a theater production, had
its own unique theme and storylineits own unique theme and storyline
• This allowed customers to return to theThis allowed customers to return to theshow more frequentlyshow more frequently
• They also did away with the traditionalThey also did away with the traditional
high-priced concessions and vendorshigh-priced concessions and vendorsthereby cutting coststhereby cutting costs
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Example: CirqueExample: Cirque
• Cirque du Soleil effectively combined theCirque du Soleil effectively combined the
best of both the circus and the theaterbest of both the circus and the theater
while eliminating everything elsewhile eliminating everything else• This allowed them to achieve bothThis allowed them to achieve both
differentiation and low costdifferentiation and low cost
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Thank you