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BLUE OCEAN STRATEGY
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
Red Ocean vs. Blue Ocean
Red Ocean
• Compete in existing market space
• Beat the competition• Exploit existing demand• Make the value-cost trade-
off• Align strategy choice of
differentiation or low cost
Blue Ocean
• Create uncontested market space
• Make the competition irrelevant
• Create & capture new demand
• Break the value-cost trade-off
• Simultaneous pursuit of differentiation and low-cost
Three Tiers of Non-CustomersThird 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
Value Innovation
Buyer Value
Cost
Value Innovation
Cost Saving – Eliminate & Reduce Competing Factors
Buyer Value Lifted – Raise & Create New Elements
Strategy Canvas
Graphical Representation of
Strategy+
Big picture View+
Landscape Scanning+
Relative Positioning vs. Competitors
The Four-Action Framework & The ERRC Grid
Eliminate
Raise
Reduce
Create
A
NEW
VALUE
CURVE
Successful Implementation of Blue Ocean Strategy
LG ELECTRONICS
Localization as an initial strategyUnderstand 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.
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.
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.
Washing Machine
Vacuum cleaner Microwave Refrigerator
Kitchen Appliances
Business group
ERRC Grid for LGE
Re-construct market boundaries (1/2)
Look acros
s Alternative
Industries
•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 players, DVD payers, DVD recorders, home theatre systems, car & portable audio equipment.
Look across Strate
gic Group
s within Indust
ry
•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 pursuing similar strategy of digitization and innovation for gaining market share.
Look acros
s Chain
of Buyer
s
•Widen the scope of products by concentrating individually on each segment of buyers.
•Home appliance products for housewives, young people for mobile phones and music players, high income groups for LCD TVs and Plasma TVs.
Re-construct market boundaries (2/2)
Look acros
s Competitive products & Servi
ce Offerings
•House-hold item as free gift along with home-appliance products.
•Complementary products like CD, DVDs of popular movies for digital display division products.
•Cookery classes for its micro-wave products
Look acros
s Functional or
Emotional
appeal to
buyers
•Attract customer with emotional advertisments.
•"A Richer, Happier life wherever you are" for home appliance division
•"Thrilling moments with HD DVR built-in Plasma TV" for HD DVR.
•"LG, caring your health in every way" for LGE's Neo Plasma Plus ACs.
Look acros
s Time
• New Trends emerging in the market
• Adopt new and latest technology to capture the markets
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.
Mission of LG: Digital Design that makes Customer’s Dream come True
Analyzing Customer’s
needs
Analyzing Product Value
Concept Creation
Lifestyle creation
Design•Needs•Desire•Dream
Value Innovation
CustomerTechnical Innovation/Efficiency Value/Brand Value/Environmental Value
Entertainment & Enjoyment/Convenience & Efficiency/Communication & Information
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%.
Successful Implementation of Blue Ocean Strategy
KAUN BANEGA CROREPATI
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
What KBC did differently?
The Red Ocean of Saas-Bahu serials
Demand from – Housewives mostly
Repetitive & Monotonous – Similar theme across serials and channels
Passive viewing
Absence of any Mega Star
No knowledge imparted
The Blue Ocean of KBC
Demand from – All sections across age groups
Each episode – fresh, content differentiation
Very Active viewing, audience could act as ‘helpline’…could win prizes…could test their own knowledge
Brought in ‘Amitabh Bachchan’ – huge charisma, mass appeal
Enhanced the General Knowledge/Awareness of audience
KBC - Four Actions Framework
A New Value Curve
Reduce Advertisement
Expenditure
Eliminate The stereotype Family Drama
Raise A Superstar Host
Create Viewer Participation
KBC – The Strategy Canvas
Successful Implementation of Blue Ocean Strategy
INDIAN PREMIER LEAGUE
Cricket before IPL
Test CricketOne-Day
ERCC Grid
A New Value Curve
Reduce Spectator Time
TechniquePredictability
Eliminate Indefiniteness of
Result
Raise Entertainment
Pace of the gameFlexibility in timings
Create Confluence of players
City LoyaltyOpen to Dummies
Three Tiers of non-customers
First Tier
•Working Executives
Second
Tier •Women
Third
Tier •Families
New Strategy Canvas
Spectato
r Tim
e
Class and Tech
nique
Predict
ability
Enterta
inment
Pace of t
he game
Flexibility in
timings
Indefiniteness
of Resu
lt
Confluence of p
layers
City Lo
yalty
Open to Dummies
Test Cricket
One-Day
IPL
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
Blue Ocean v/s Differentiation
Differentiation• Choice between
differentiation and cost leadership
• Competes within existing boundaries
Blue Ocean• Blue Ocean Strategy is not
about making a trade-off between differentiation and low cost,
• But about breaking the trade-off between the two
• Looks across conventional boundaries of competition
Blue Ocean v/s Customer Oriented
Customer Oriented• Tend to focus on existing
customers of the company and the industry
• Companies make adjustments and modifications over existing value elements
Blue Ocean• Creates new demand
through exploring the industry’s non-customers
• Discover the paths for reconstructing market boundaries and
Thank You