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Ch 1: Creating Blue Oceans. By Elias Balderas, Ryan Cooley, Jason Campos, and Stephanie Gomez. Introduction. What are the differences between red and blue oceans ? Cirque du Soleil The Rising Imperative of creating blue oceans. From Company and industry to Strategic move.
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Ch 1: Creating Blue Oceans By Elias Balderas, Ryan Cooley, Jason Campos, and Stephanie Gomez
Introduction • What are the differences between red and blue oceans? • Cirque du Soleil • The Rising Imperative of creating blue oceans. • From Company and industry to Strategic move. • Value Innovation: the cornerstone of blue ocean strategy • Value Innovation Chart
So what’s the difference • Red Oceans- represent all the known industries or known market space. Here companies try to outperform their rivals and get their share of the existing demand. • Blue Oceans-are defined by untapped market space, that demand creation, and have the opportunity for highly profitable growth.
Redvs. Blue • Saturated Market New Market Space • Too Much Competition No Competition • Smaller Profit Margins Higher Profitability • Rules are KnownRule Maker
Cirque du Soleil • What makes Cirque du Soleil remarkable was that achieved rapid growth in a declining industry. • It appealed to a whole new group of customers rather than to try take from an already shrinking circus market. • Its success came from applying aspects of different industries and implementing it into theirs. • “They reinvented the circus”
The Rising Imperative of Creating Blue Oceans • Technological advances have dramatically increased industrial productivity and has allowed suppliers to produce new products/services. • As a result, Supply Exceeds demand. • As global competition intensifies, there is no clear evidence of an increase in demand. • This results in accelerated commoditization of products/services. • Brands are becoming more similar and as a result people are selecting products based significantly off price.
From Company and Industry to Strategic Move • Are there lasting “excellent or visionary” companies that continuously outperform the market? • In search of Excellence, built to last, creative destruction • The answer is no. Neither the company nor the industry is the best unit of analysis for explaining the creation of blue oceans and sustained high performance. • Hotels, cinema, retail, airlines, energy, computers broadcasting, automobiles. • Neither industry nor organizational characteristics explain the difference between red and blue oceans. • Private or pubic, low or high tech, big and small companies.
Value Innovation: the cornerstone of blue ocean strategy • Separates winners from losers. Focus on making the competition irrelevant by creating a length in value, which is creating a blue ocean. • Value innovation places equal emphasis on value and innovation. • Value innovation occurs only when companies align innovation with utility, price, and cost positions. • Cirque du soleil focused on catering to adults rather than children, which resulted in competing in new market space. • Disney media plans to go into Russian media, which is untapped market space.(SM, Coulter.)
Value Innovation Chart COST VALUE INNOVATION BUYER VALUE
Conclusion • Red Ocean- Crowded market space, many competitors, and smaller profit margins. • Blue Ocean- new market space, with less competitors, where competition is irrelevant. • Companies that want to effectively pursue a blue ocean should use value innovation as their strategy of choice.
