In this presentation, we will introduce the concept of “Blue Ocean Strategy”, to help you understand and gain a strong foothold in online competitive market place. To know more about Welingkar School’s Distance Learning Program and courses offered, visit: http://www.welingkaronline.org/distance-learning/online-mba.html

1. Chapter 1
Creating Blue Oceans

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3. Objectives
After reading this chapter you will be able to:
• Understand the term “Blue Ocean”
• Know how to make a Competition Irrelevant
• Know how to create Blue Oceans
• Familiarize with Pillars of Blue Ocean Strategy

4. Introduction
• Guy Laliberte, the Chief Executive Officer of Cirque
du Soleil
• He was a famous accordion player
• Laliberte and his group of street performers founded
Cirque in 1984
• It became one of the Canada’s largest cultural exponent

5. Introduction
• Huge earnings of Cirque was not made out of a
thriving industrial activity
• Many adverse phenomena were confronted by Guy and
friends for the outstanding performance of Cirque
• It was possible to them to make such a rapid growth
due to the supplier power on the part of the star
performer

6. Introduction
• The Ringing Brothers and Barnum and Baily famous in
circus field are competitors to Cirque
• In reality, there was no such competition between
them
• It was quite well meant and apt to title their first
production as “We reinvent the Circus”

7. Introduction
• Cirque du Soleil realized that companies should avoid
direct competition for steady growth in the future
• Cirque made the noteworthy achievement as they
could envision the two market space – the red oceans
and the blue oceans

8. Introduction
• The red oceans have well defined and laid down rules
and regulations to rein in them in a competitive field
• They try to outperform each other to grab a greater
share of the market leading to overcrowding the
limited market space
• On the contrary, the blue oceans can creat demand and
thus an opportunity for highly profitable growth on
their own

9. Introduction
• The red oceans have to struggle and make their own
way outsmarting the rivals successfully so as to be in
business
• The real focus has been on competition based red ocean
strategy

10. How to create Blue Oceans
• If we look back, we could see that many leading
industries of today are blue oceans in the past
• The non existent blue oceans today are really existent
red oceans of t0morrow
• Though the term ‘Blue Ocean’ is new but the existence
of such phenomenon is not new

11. How to create Blue Oceans
• Just as evolution of the mankind, the industry also
undergoes constant evolution resulting of new and
modified industrial entity
• It could be seen that the corporate strategy is heavily
influenced with military strategy

12. The End Result of creating
Blue Ocean
• Incremental improvement of about 86% within the
existing market space
• Remaining 14% of launches were for creating blue
oceans which generated 38% of total revenue entered
which yield 61% of total profit

13. The End Result of creating
Blue Ocean
• Impact of creation of Blue Oceans on Profit and
Growth
14% 38 61%
%
86
% 62
%
39
%
Launches in existing market space (Red Oceans)
Launches in non-existing market space (Blue Oceans)

14. Why is Creating
Blue Oceans Mandatory
• There are many imperatives of creating blue oceans
• The population curve shows a downward trend causing
the demand curve to take a plunge
• Total dissatisfaction of the existing industry enable
hem to come out with new and better quality prices

15. Strategic Move
• There are certain questions deserve the attention like
– Can a company escape from the throttling grip of red ocean
competition?
– Is there a calculated decisive and systematic approach to
achieve the blue oceans?
• The first and foremost thing is to define the basic unit
for our research analysis

16. Strategic Move
• “In search of Excellence” was a best-seller published
around 20 years ago
• At the same time its contemporary ‘Built to Last’ was
able to trade its stand
• “Built to Last became a best seller as they could earn
the trust of readers as well as the corporate analysers

17. Strategic Move
• For Example:
– HP was featured by ‘Built to Last’ as
outperforming the market over a long time
– According to ‘Creative Destruction’ the
companies those were set to the market
leaders by ‘Built to Last’ never existed

18. Strategic Move
• The companies can create their own blue oceans and
shape them up into high performers
• It was possible for Cirque de Soleil to create a new
market space of their own in entertainment sector

19. Strategic Move
• The strategic move was required to create and
sustain excellency in performance
• Example:
– Compaq was able to take the blue ocean
strategy in creating the server industry

20. Strategic Move
• The products and services delivered by the strategic
moves were able to open up new and much rewarding
market space

21. Strategic Move
• Common factors that led to creation of blue oceans and
came out of the stranglehold of the red oceans were
– Victorious group of small and large companies
– Managed by young and inexperienced people as well as old
and experienced ones
– Low-tech and high-tech
– Domestic as well as multinational

22. Pillars of Blue Oceans Strategy
• The companies caught in the red ocean followed a
conventional approach of defending themselves from
being beaten by their rivals from the stiff competition
• The logic behind creation of the blue ocean strategy
was to make the competition irrelevant

23. Pillars of Blue Oceans Strategy
• Value sans innovation means improving value but not
making the firm foothold in the marker place
• Approach of blue oceans is to provide both,
differentiation and low cost together

24. Pillars of Blue Oceans Strategy
• The efforts adopted by Cirque de Soleil helped only in
rising costs and without any upward trend in revenue
earnings
• It should be noticed that Cirque did the competitors
without actually taking part in the competition

25. Pillars of Blue Oceans Strategy
• It was an all-in-all way out from the circus traditions
and customs the Cirque brought out
• The changes were both innovative and value-added and
turned out to be a real crowd puller

26. Pillars of Blue Oceans Strategy
• Cirque also introduced hitherto non-circus factors like
a story-line, artistic music etc.
• In many ways is kept a close resemblance to a theater
• The visual performance was made more meaningful
and attractive

27. Pillars of Blue Oceans Strategy
• Cirque introduced the concept of multiple production
to keep up the tempo of harvesting the market of
entertainment world
• Cirque played a dual role of a circus and a theater
simultaneously

28. Pillars of Blue Oceans Strategy
• The diagram show how the blue ocean strategy is
interrelated with the dual strategy of both innovation
and value
Costs
Innovation
Value
Buyer Value
• Value innovation means to give more value to its buyer
as well as achievement of a leap in value by the
industry

29. Red Ocean Vs. Blue Ocean Strategy
Red Ocean Strategy Blue Ocean Strategy
Compete in the existing market space No competition – create non-
existing, unrestricted market space
Beat the competition and emerge out Make the very competition irrelevant
of red
Exploit existing demand Create and grab new demand
Make the value-cost trade-off Break the value-cost trade-off
Align the activities with it strategy of Align activities in pursuit of
differentiation on or low cost differentiation on or low cost
whatever

30. Blue Ocean Strategy –
Formulation &Execution
• The chances of success are bit lower when companies
venture beyond the existing market space
• Companies have yet to make up their mind towards
the call of blue oceans

31. Principles & Risk Factors of
Blue Ocean Strategy
The Six Principles of Blue Ocean Strategy
Formulation principles Risk Factor for each principle
1. Reorganizing market parameters Search risk
2. Focus on the big picture Planning Risk
(Future prospectus)
3. Reach beyond existing demand Scale Risk
4. Get the sequence of strategy right Business model risk
Execution principles
1. Overcome hurdles Organizational risk
2. Build execution into strategy Management risk

32. Summary
• The chapter gives you an idea of what is Blue ocean
• How the blue ocean can be created successfully
• Cirque introduced a new strategy, eliminating certain
factors which are were a hindrance to rapid growth and
giving the circus show a new concept

33. End of Chapter 1
Creating Blue Oceans

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