Go where profits and growth

are – and where the

competition isn’t.

OCEAN

- is known as the MARKET UNIVERSE.

RED OCEAN

- are all the industries in existence today - the known market space.

- industry boundaries are defined and accepted, and the competitive rules of the game are known.

BLUE OCEAN

- uncontested market space for an unknown industry or innovation

- exists where no firms currently operate, leaving the company to expand without competition.

1. Is your company facing heightened competition from domestic and international rivals?

2. Do your sales representatives increasingly argue they need to offer deeper and deeper price discounts to make sales?

3. Is your company focused more on cost cutting, quality control, and brand management at the expense of growth, innovation, and brand creation?

4. Do you see outsourcing to low cost companies or countries as a principal prerequisite to regain competitiveness?

5. Is commoditization of offerings a frequent worry of your company?

RED OCEAN BLUE OCEAN

Compete in existing market

space

Create uncontested market

space

Beat the competition Make the competition

irrelevant

Exploit existing demand Create and capture new

demand

Make the value‐cost trade‐off Break the value‐cost trade‐off

Align the whole system of a

company’s activities with its

strategic

choice of differentiation or low

cost

Align the whole system of a

company’s activities in pursuit

of

differentiation and low cost

VALUE INNOVATION

- is the cornerstone of blue ocean strategy.

- is the simultaneous pursuit of differentiation

and low cost.

- focuses on making the competition irrelevant

by creating a leap of value for buyers and for

the company, thereby opening up new and

uncontested market space.

REDUCEWhich factors should

be reduced well below

the industry’s

standard?

CREATEWhich factors should

be created that the

industry has never

offered?

ELIMINATEWhich of factors

that

the industry takes

for

granted should be

eliminated?RAISE

Which factors should

be raised well above

the industry’s

standard?

A

VALUE

NEW

CURVE

1ST TIER: “SOON TO

BE” non customers

who are on the edge

of your market

waiting to jump ship2ND TIER:

“REFUSING” non

customers who

consciously choose

against your market

3RD TIER:

“UNEXPLORED” non

customers who are in

markets distant from

yours

- is closest to your market. They sit on the edge of the

market.

- they are buyers who minimally purchase an

industry’s offering out of necessity but are mentally

noncustomers of the industry. They are waiting to

jump ship and leave the industry as soon as the

opportunity presents itself.

- However, if offered a leap in value, not only would

they stay, but also their frequency of purchases

would multiply, unlocking enormous latent demand.

- people who refuse to use your industry’s

offerings.

- buyers who have seen your industry’s

offerings as an option to fulfill their

needs but have voted against them.

- is farthest from your market.

- noncustomers who have never thought of

your market’s offerings as an option.

- by focusing on key commonalities across

these noncustomers and existing customers,

companies can understand how to pull them

into their new market.

- Ralph Lauren created a blue ocean of ―high fashion with no

fashion‖.

- combined the best features of haute couture (designer

name, elegance of their stores, and fine materials) with the

best features of lower-priced classical lines (classical

look, lower prices) to not only capture share from both strategic

groups, but to also draw new customers into the market.

Pfizer created a blue ocean by shifting

the focus of the pharmaceutical industry’s

largely functional orientation — from

medical treatment to lifestyle

enhancement, an emotional orientation.

- Cirque Du Soliel created uncontested new market space

that made the competition irrelevant.

- It appealed to a whole new group of customers: adults

and corporate clients prepared to pay a price several

times as great as traditional circuses for an

unprecedented entertainment experience.

- Cirque Du Soleil reinvented the circus.