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Blue ocean strategy


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Blue ocean strategy

  2. 2. History and Background • Book authored by W.Chan Kim and Renee Mauborgne in 2005; • Studied 150 strategic moves spanning more than 100 years and 30 industries • Blue Ocean Strategy is the simultaneous pursuit of low cost and differentiation • Aim is not to outperform the competition but to make it irrelevant
  3. 3. Red Ocean vs. Blue Ocean Red Ocean Blue Ocean • Compete in existing market • Create uncontested market space space • Beat the competition • Make the competition • Exploit existing demand irrelevant • Make the value-cost trade- • Create & capture new off demand • Align strategy choice of • Break the value-cost trade- differentiation or low cost off • Simultaneous pursuit of differentiation and low-cost
  4. 4. Three Tiers of Non-Customers Third Tier : Unexplored non customers in distant markets Second Tier : Refusing noncustomers who consciously choose against the market First Tier : Soon-to-be noncustomers who are on the edge of the market
  5. 5. Value Innovation Cost Saving – Eliminate & Reduce Competing Factors Buyer Value Lifted – Raise & Create New Elements
  6. 6. Strategy Canvas Graphical Representation of Strategy + Big picture View + Landscape Scanning + Relative Positioning vs. Competitors
  7. 7. The Four-Action Framework & The ERRC Grid A N Eliminate E W Raise V A L U Reduce E C Create U R V E
  8. 8. Successful Implementation of Blue Ocean Strategy LG ELECTRONICS
  9. 9. Localization as an initial strategy Understand the idiosyncrasies of key local markets by opening research, manufacturing, and marketing facilities in those countries. Some of the localization strategies adopted in India:  Refrigerators with larger vegetable and water-storage compartments, surge-resistant power supplies  Exteriors: Red color - South Indians and Green color - North Indians.  Microwaves with dark-colored interiors to hide spices’ stains  Television with a built-in video game for cricket fans and extra-loud sound to listen music.
  10. 10. Why Blue Ocean Strategy  Tough competition from local and global players  Need for sustenance  Create untapped market space and higher profitable growth.  Target to be in the top 3 in the consumer electronics market by 2010.  Plans to Double its sales volume and profit by 2010  Focus more on high-end products  Enter new segments of emerging markets like China, India, Middle- east and Africa and thus creating uncontested market space.
  11. 11. Blue Ocean in India  Strategy: Improve the product portfolio and Innovative management processes.  Products targeting health-conscious consumer under the brand name ‘Intello’. Planning on high-end products like Whisen range of wall-mounted AC’s, TV Dios refrigerators and X-canvas plasma TVs.  Planned to launch innovative products like Qiblah phone, TV refrigerators, Swarovski crystal refrigerators and bag-less range of vacuum cleaners.
  12. 12. ERRC Grid for LGE
  13. 13. Re-construct market boundaries (1/2) • Moving from conventional electronic products to high-end products like big screens LCD and Plasma TVs in collaboration with Philips. • Expanding its product portfolio by adding vacuum cleaners, MP3 Look across players, DVD payers, DVD recorders, home theatre systems, car & Alternative portable audio equipment. Industries • Group of companies within an industry that pursue a similar strategy. • Different groups for different products and different markets. • Group of consumer electronics companies like Sony, Samsung Look across pursuing similar strategy of digitization and innovation for gaining Strategic market share. Groups within Industry • Widen the scope of products by concentrating individually on each segment of buyers. • Home appliance products for housewives, young people for mobile Look across phones and music players, high income groups for LCD TVs and Chain of Plasma TVs. Buyers
  14. 14. Re-construct market boundaries (2/2) • House-hold item as free gift along with home-appliance products. • Complementary products like CD, DVDs of popular movies for digital Look across display division products. Competitive • Cookery classes for its micro-wave products products & Service Offerings • Attract customer with emotional advertisments. • "A Richer, Happier life wherever you are" for home appliance division Look across • "Thrilling moments with HD DVR built-in Plasma TV" for HD DVR. Functional or • "LG, caring your health in every way" for LGE's Neo Plasma Plus ACs. Emotional appeal to buyers • New Trends emerging in the market • Adopt new and latest technology to capture the markets Look across Time
  15. 15. Three Tiers of non-customers for LGE Third Tier: "Unexplored non- customers". Very poor people who use limited electronic products. Second Tier: "Refusing non-customers". Can use the products but avoids it due to improper knowledge and information. Customers of regular TV could be converted into users of LDC and Plasma TVs with right advertising and marketing campaigns First Tier: "Soon to be non-customers". These are the customers who used the competitors' products. Convert them by making them aware about features of LG's products and services.
  16. 16. Mission of LG: Digital Design that makes Customer’s Dream come True Analyzing Concept Product Value Creation Technical Innovation/Efficiency Customer Value/Brand Value/Environmental Value •Needs Value Design •Desire Innovation •Dream Entertainment & Enjoyment/Convenience & Efficiency/Communication & Information Analyzing Lifestyle Customer’s creation needs
  17. 17. Benefits to LG by adopting Blue Ocean Strategy  LG implemented Blue Ocean Strategy from 1st January 2007 for its mobile communication and digital display divisions.  The positive statistics for the first quarter of 2007, especially for its mobile communication and digital display division reinforces LGE confidence about its Blue Ocean Strategy.  Mobile communication division grew by 14.7%.  Revenues increased by 17.8% with sales of 15.8 million of Chocolate series phones.  Digital Display division including plasma display panels and flat panel TVs and monitors grew by 1.5%.
  18. 18. Successful Implementation of Blue Ocean Strategy KAUN BANEGA CROREPATI
  19. 19. KBC – Background • The challenge - 'a program idea that will have as much viewership as an Indo-Pak cricket match on a Sunday’. • Adaptation of a successful program in the US, Who Wants To Be A Millionaire. • Created a new era in TV shows entertainment as a reality TV show by bringing the viewers as participant in the TV shows. • KBC did leave all the saas-bahu serials behind: – 1. KBC Star Plus 2130-2200 5.6 – 2. KBC Star Plus 2100-2130 4.9 – 3. Kahaani Ghar Ghar Kii Star Plus 2200-2230 4.7 – 4. Kyunki Saas Bhi Kabhi Bahu Thi Star Plus 2230-2300 4.5 – 5. Kasautii Zindagii Kay Star Plus 2030-2100 3.7
  20. 20. What KBC did differently? The Red Ocean of The Blue Ocean of Saas-Bahu serials KBC Demand from – Housewives mostly Demand from – All sections across age groups Repetitive & Monotonous – Similar Each episode – fresh, content theme across serials and channels differentiation Passive viewing Very Active viewing, audience could act as ‘helpline’…could win prizes…could test their own knowledge Absence of any Mega Star Brought in ‘Amitabh Bachchan’ – huge charisma, mass appeal No knowledge imparted Enhanced the General Knowledge/Awareness of audience
  21. 21. KBC - Four Actions Framework Reduce Advertisement Expenditure Create A New Eliminate Viewer Value The stereotype Participation Curve Family Drama Raise A Superstar Host
  22. 22. KBC – The Strategy Canvas
  23. 23. Successful Implementation of Blue Ocean Strategy INDIAN PREMIER LEAGUE
  24. 24. Cricket before IPL Test Cricket One-Day Spectator Time Class and Predictability Entertainment Pace of the game Flexibility in Indefiniteness of Technique timings Result
  25. 25. ERCC Grid Reduce Spectator Time Technique Predictability Create Confluence of Eliminate players A New Value Curve Indefiniteness City Loyalty of Result Open to Dummies Raise Entertainment Pace of the game Flexibility in timings
  26. 26. Three Tiers of non-customers • Working Executives First Tier Second Tier • Women Third Tier • Families
  27. 27. New Strategy Canvas Test Cricket One-Day IPL
  28. 28. Misconceptions • Blue Ocean Strategy is a customer- oriented strategy • Blue Ocean Strategy is like an old wine in a new bottle, as it is just a modified version of differentiation strategy
  29. 29. Blue Ocean v/s Differentiation Differentiation Blue Ocean • Choice between • Blue Ocean Strategy is not differentiation and cost about making a trade-off leadership between differentiation and • Competes within existing low cost, boundaries • But about breaking the trade-off between the two • Looks across conventional boundaries of competition
  30. 30. Blue Ocean v/s Customer Oriented Customer Oriented Blue Ocean • Tend to focus on existing • Creates new demand customers of the company through exploring the and the industry industry’s non-customers • Companies make • Discover the paths for adjustments and reconstructing market modifications over existing boundaries and value elements
  31. 31. Thank You