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By Priyanka Kale

Business Strategy

Blue Ocean StrategyMarch 2014

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Topics:

History and Background of Author and book

Traditional Logic

What is Blue Ocean?

Red Ocean vs. Blue Ocean

Value Innovation

Tools of BOS

1. EERC Grid

2. Canvas/Value CurveExample of BOS

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History and

Background

Blue Ocean Strategy is a businessstrategy book first published in 2005and written by W. Chan Kim

In this book the authors conveys thatan organization should create new

demand in an uncontested marketspace instead of competing in existingindustry which they call as BlueOcean.

The contents of the book are based onresearch and a series of HarvardBusiness Review articles as well as

academic articles on various extents ofthe subject.

Useful for CEOs, Executive, HOD andprime ministers.

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Traditional logic

Segmented; Competitive; defined boundaries;competition based on established rules, representsthe current scenario

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Blue Ocean

Blue Ocean Strategy is a powerful concept to work

on value proposition & explore new market

segments.

It is about pursuing - Value Innovation TheSimultaneous pursuit of differentiation and low cost

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Red Ocean Strategy Blue Ocean Strategy

Focus on rival within itsindustry

Looks across alternativeindustries

Beat the competitor. (Fightto win)

Make competition irrelevant(Win without fighting)

Growth is limited New opportunities of growth(unattractive market) with high

profit possibilitiesRisk involved defined and

known.Risk involved is high risk or there

is issue of risk

Decision between higherquality or lower costs Decision for higher customervalue and lower costs

Red versus Blue Ocean

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Creating Blue Oceans - Value Innovation

Firm needs to decideproduct/service which is innovativein parallel to utility, price and cost.

Value Innovation is achieved by

aligning three propositions.

1) Value proposition (utility minusprice)

2) Profit proposition (price minuscost)

3) People proposition

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BOS Tools or how to find new value curve

The Strategy Canvas

As per author, it is the central diagnostic and action framework for building a compellingblue ocean strategy.

The strategy canvas serves four purposes:

1) Identify the competitor and nature of business

2) Identify the factors of competitor and comparing your business with competitors3) Understand the possibilities of creating new value propositions and exploring new value

curves

4) Targeting new customers for sustaining in marketspace

The value curve is the basic component of the strategy canvas. A strong value curve has

focus, divergence as well as a compelling tagline

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ERRC Grid

ERRC grid is consideredas the immediate planof action to achieve thebelow mentionedbenefits.

1) Utility

2) Price

3) Cost

4) Competitive factors

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Blue Ocean Strategy Description

Alternative industries Create altogether new industry Cricket-ent

Value Innovation 20-20 cricket is a fast pace game innovationwhich caters to total market segment ratherthan just cricket lover

Creating new demand Created new demand of watching cricketwith family

Complementary productand service offering

Provides complementary service ofentertainment along with cricket

Break value and cost tradeoff

Provides differentiation value at low cost

Example 1: IPLIndian Premiere League

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NewValueCurve

CreateEntertainmentNewSegment Crick-ent

EliminateConventionalwisdom about

cricket

RaiseSpeed of the game

ExcitementFamily InvolvementPool of young talent

ReduceTime Spend

Money Spend

Uncertainty of Result

ERRC Grid of IPL - Indian Premiere League

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Blue Ocean Strategy Description

Alternative industries Timeshare basis

Value Innovation Inflation free and cheaper

Creating new demand Pre bought holidays for 25 years

Complementary product andservice offering

Standard accommodation at a goodprice

Break value and cost trade off Provides differentiation value at lowcost

Example 2: Mahindra Club Holidays

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ERRC Grid of Mahindra Club Holidays

ReduceAmount and TimeLuxury without compromising oncomfort

CreateCustomization of packages/low costpackagesMembership structure - in easy EMITie up with all the RCI resorts

EliminatedMiss selling of the productInconvenient way of registration

RaiseDiscounts of food and beverages andsightseeingFocused on promotional activitiesIncrease in no. of properties in India andAbroad with 15+ project in pipeline

NewValueCurve

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Blue Ocean Strategy Description

Alternative industries The speed of plane at price of car

Value Innovation Offering the flexibility of bus travel at thespeed of air travel by using secondary airports

.

Creating new demand Short haul, low cost air travel

Complementary productand service offering

Simple fare structure

Example 3: Southwest Airlines

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Example 3: Southwest Airlines

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NewValueCurve

Create

able to price againstcar transportation

EliminateLounge/Food Facility

Seating of Classchoice

Raisefriendly service

Speedfrequent point-to-point departures

ReduceUncertainty of

scheduleHub Connectivity

ERRC Grid of Southwest Airlines

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