RED OCEANS BLUE OCEANS THE MARKET UNIVERSE

RED OCEANS = THE KNOWN

COMPETITION IS WITHIN EXISTING MARKET SPACE

FOCUS IS ON EXISTING CUSTOMERS

EXPLOTATION OF EXISTING DEMAND

Cosmetic industry Anti wrinkles brands models promises Skin creams Youth beauty Expensive advertising

BLUE OCEANS = THE UNKNOWN

NEW MARKETS AND NEW DEMAND

COMPETITION IS IRRELAVANT

Body shop vitamins functional Essential oil prevention mineral

FOCUS IS ON NON CUSTOMERS

The Three Tiers of Noncustomers Although the universe of noncustomers typically offers big blue ocean opportunities ,few companies have keen insight into who noncustomers are and how to unlock them.To convert this huge latent demand into real demand in the form of thriving new customer,companies need to deepen their understand of the universe of noncustomers. Your Market First Tier Second Third First Tier: “Soon-to-be” noncustomers who are on the edge of your market, waiting to jump ship. Second Tier: “Refusing” noncustomers who consciously choose against your market. Third Tier: “Unexplored” noncustomer who are in markets distant from yours.

The three Tiers of Non- customers First Tier:”Soon-to be” noncusmers who are on the edge of your market waiting to jump ship. Second Tier:”Refusing” noncustomers who consciously choose against your market. Third Tier: “Unexplored” noncusmers who are in market distant from ours.

Examples of strategic moves that created blue oceans of new, untapped demand: Cirque du Soleil (the circus reinvented for the entertainment market) - Starbucks (coffee as low-cost luxury for high-end consumers) - Ebay (online auctioning) - Sony (the Walkman - personal portable stereos) - Cars: Japanese fuel-efficient autos (mid-70s) and Chrysler minivan (1984) - Computers: Apple personal computer (1978) and Dell's built-to-order computers (mid-1990s).

Creating Blue Oceans Companies have long engaged in head to head competition in search of sustained, profitable growth. They have fought for competitive advantage, battled over market share ,and struggled for differentiation. Yet in today’s overcrowded industries, competing head on results in nothing but a bloody “red ocean” of rivals fighting over a shirking profit pool. Blue ocean strategy provide a systemic approach to making the competition irrelevant.

Red Ocean Vs Blue Ocean Strategy Red Ocean Strategy Blue Ocean Strategy Competing in existing market space. Create uncontested market space. Beat the competition. Make the competition irrelevant. Exploit existing demand. Create and capture new trade-off. Make the value cost trade-off. Break the value-cost trade off.

Cirque du Soleil - an example of creating a new market space, by blending opera and ballet with the circus format while eliminating star performer and animals

Ignoring the competition and focusing on the buyer VALUE INNOVATION Ignoring the competition and focusing on the buyer Will help create value For everyone

Value Innovating:The Cornerstone of Blue Ocean Strategy What consistency separated winners from losers in creating blue oceans was their approach to strategy.The companies caught in the red ocean followed a conventional approach,racing to beat the competition by building a defensible position within the existing industry order.The creator of blue ocean ,surprisingly,didn’t use the competition as their benchmark. Instead ,they followed different strategic logic that we call value innovation. Value innovation place equal emphasis on value and innovation .Value without innovation tends to focus on value creation on an incremental scale,sometime that improve value but is not sufficient to make you stand out n he marketplace.Innovation with out value tends to be technology-driven,market pioneering,of futuristic,often shooting beyond what buyers are ready to accept and pay for. In this sense,it is important to distinguish between value innovation as opposed to technology innovation and market pioneering.

Value Innovation: The Cornerstone of Blue Ocean Strategy Value innovation is created in the region where a company's actions favorably affect both its cost structure and its value proposition to buyers. Cost savings are made by eliminating and reducing the factors an industry competes on. Buyer value is lifted by raising and creating elements the industry has never offered. Over time, costs are reduced further as scale economies kick in due to the high sales volumes that superior value generates. Costs Value Innovation Buyer Value The Simultaneous Pursuit of Differentiation and Low Cost

The Four Actions Framework To reconstruct buyer value element in crafting a new value curve we have developed the four actions framework. Reduce Which factors should be reduced well below the industry’s standard ? A New Value Curve Eliminate Which of the factors that the industry takes for granted should be eliminated? Create Which factors should be created that the industry has never offered ? Raise Which factors should be raised well above the industry’s standard ?

Chapter 2:The Eliminate-Reduce-Raise-Create Grid There is a third tool that is key to creation oceans.It is a supplementary analytic to the four actions framework Given below: Eliminate Star performers Animal show Multiple show arenas Raise Unique venue Reduce Fun and humor Thrill and danger Create Theme Redefined environment Multiple production Artistic music and dance