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Marketing management

Project report

SUBMITTED TO:
PROF. SHALINI NATH TRIPATHI
FACULTY- MARKETING

SUBMITTED BY:
PRATEEK SHRIVASTAV
[PGDM 2007-09]

JAIPURIA INSTITUTE OF MANAGEMENT, LUCKNOW

ACKNOWLEDGEMENT
WITH GREAT PLEASURE, WE EXTEND OUR GRATITUDE

TOWARDS PROF. SHALINI NATH TRIPATHI, UNDER WHOSE


VALUABLE GUIDANCE, CONSTANT INTEREST AND

ENCOURAGEMENT WE HAVE BEEN ABLE TO COMPLETE THE

PROJECT SUCCESSFULLY.

THIS CO-OPERATION IS NOT ONLY USEFUL FOR THIS PROJECT

BUT WILL ALSO BE A CONSTANT SOURCE OF INSPIRATION FOR

US IN THE FUTURE.

WE ARE ALSO THANKFUL TO ALL THOSE WHO HELPED US

CONSTANTLY IN THE PREPARATION OF THIS PROJECT DIRECTLY

OR INDIRECTLY.

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OBJECTIVE.......................................................................................................................3
BLUE OCEAN STRATEGY..............................................................................................4
IMPLEMENTING BLUE OCEAN STRATEGY..............................................................6
IMPLEMENTATION ........................................................................................................... ...8
SIX PATH FRAMEWORK...............................................................................................11
FOUR ACTIONS UNDER BLUE OCEAN STRATEGY.............................................. ......14
DEVELOPING A BLUE OCEAN STRATEGY ................................................................................15
COMPANIES USING BLUE OCEAN STRATEGY.......................................................16
CONCLUSION.................................................................................................................19
BIBLIOGRAPHY/ WEBLIOGRAPHY...........................................................................21

OBJECTIVE
The objective of our project “Blue Ocean Strategy” is to understand real meaning behind
the Blue Ocean and how it is different from the Red Ocean strategy. The project also
describe about various steps taken to implement this strategy. Blue Ocean Strategy

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describe rather than competing within the confines of existing industry or trying to steal
customers from rivals (Red Ocean strategy), uncontested market space should be
developed that makes competition irrelevant. Thus project also gives us an idea about
creating new market space.
Red oceans are all the industries in existence today—the known market space. In the red
oceans, industry boundaries are defined and accepted, and the competitive rules of the
game are known. Here companies try to outperform their rivals to grab a greater share of
existing demand. As the market space gets crowded, prospects for profits and growth are
reduced. Products become commodities, and cutthroat competition turns the red ocean
bloody.
Blue oceans, in contrast, denote all the industries not in existence today—the unknown
market space, untainted by competition. In blue oceans, demand is created rather than
fought over. There is ample opportunity for growth that is both profitable and rapid. In
blue oceans, competition is irrelevant because the rules of the game are waiting to be set.
Blue Ocean is an analogy to describe the wider, deeper potential of market space that is
not yet explored. Like the “blue” ocean, it is vast, deep, powerful, in terms of profitable
growth, and infinite.

In Blue Oceans, demand is created rather than fought over. There is ample
opportunity for both growth and profit.
...................... W. Chan Kim

BLUE OCEAN STRATEGY

The metaphor of Red and Blue oceans describes the market universe. Red oceans are all
the industries in existence today—the known market space. In the red oceans, industry
boundaries are defined and accepted, and the competitive rules of the game are known.

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Here companies try to outperform their rivals to grab a greater share of product or service
demand. As the market space gets crowded, prospects for profits and growth are reduced.
Products become commodities or niche, and cutthroat competition turns the red ocean
bloody. Hence, the term red ocean is used.

Blue oceans, in contrast, denote all the industries not in existence today—the unknown
market space, untainted by competition. In blue oceans, demand is created rather than
fought over. There is ample opportunity for growth that is both profitable and rapid. In
blue oceans, competition is irrelevant because the rules of the game are waiting to be set.
Blue ocean is an analogy to describe the wider, deeper potential of market space that is
not yet explored.

The corner-stone of Blue Ocean Strategy is 'Value Innovation'. A blue ocean is created
when a company achieves value innovation that creates value simultaneously for both the
buyer and the company. The innovation (in product, service, or delivery) must raise and
create value for the market, while simultaneously reducing or eliminating features or
services that are less valued by the current or future market. The authors critique Michael
Porter's idea that successful businesses are either low-cost providers or niche-players.
Instead, they propose finding value that crosses conventional market segmentation and
offering value and lower cost.
.

This idea was originally proposed by Prof. Charles W. L. Hill from Michigan State
University in 1988. Prof. Hill claimed that Porter's model was flawed because
differentiation can be a means for firms to achieve low cost. Prof. Hill proposed that a
combination of differentiation and low cost may be necessary for firms to achieve a
sustainable competitive advantage.

Blue Ocean Strategy is a business strategy that promotes a systematic approach "for
making the competition irrelevant." A core idea is to create a leap in value for both the

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company and its buyers by breaking the differentiation/low cost trade-off and to align
product value and profit propositions

IMPLEMENTING BLUE OCEAN


STRATEGY
Before implementing Blue ocean strategy it is very important to know the difference
between Red and Blue Ocean. The difference can be known by the following table:-

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Blue ocean strategists recognize that market boundaries exist only in managers’ minds,
and they do not let existing market structures limit their thinking. To them, extra demand
is out the re, largely untapped. The crux of the problem is how to create it. This, in turn,
requires a shift of attention from supply to demand, from a focus on competing to a focus
on creating innovative value to unlock new demand. This is achieved via the
simultaneous pursuit of differentiation and low-cost.

Under blue ocean strategy, there is scarcely an attractive or unattractive industry because
the level of industry attractiveness can be altered through companies’ conscientious
efforts. As market structure is changed by breaking the value/cost tradeoff, so are the
rules of the game. Competition in the old game is therefore rendered irrelevant. By
expanding the demand side of the economy new wealth is created. Such a strategy
therefore allows firms to largely play a non–zero-sum game, with high payoff
possibilities.

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IMPLEMENTATION
Look Across Functional or Emotional Appeal to Buyers
When companies are willing to challenge the functional-emotional orientation of their
industry, they often find new market space. We have observed two common patterns.
Emotionally oriented industries offer many extras that add price without enhancing
functionality. Stripping away those extras may create a fundamentally simpler, lower
priced, lower-cost business model that customers would welcome. Conversely,
functionally oriented industries can often infuse commodity products with new life by
adding a dose of emotion and, in so doing, can stimulate new demand.
Two well-known examples are Swatch, which transformed the functionally driven budget
watch industry into an emotionally driven fashion statement, or The Body Shop, which
did the reverse, transforming the emotionally driven industry of cosmetics into a
functional, no-nonsense cosmetics house.

Look Across Complementary Products and Service Offerings


Few products and services are used in a vacuum. In most cases, other products and
services affect their value. But in most industries, rivals converge within the bounds of
their industry’s product and service offerings. Take movie theaters. The ease and cost of
getting a babysitter and parking the car affect the perceived value of going to the movies.
Yet these complementary services are beyond the bounds of the movie theater industry as
it has been traditionally defined. Few cinema operators worry about how hard or costly it
is for people to get babysitters. But they should, because it affects demand for their
business. Imagine a movie theater with a babysitting service.
Untapped value is often hidden in complementary products and services. The key is to
define the total solution buyers seek when they choose a product or service. A simple way
to do so is to think about what happens before, during, and after your product is used.
Babysitting and parking the car are needed before people can go to the movies. Operating
and application software are used along with computer hardware. In the airline industry,
ground transportation is used after the flight but is clearly part of what the customer
needs to travel from one place to another.

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Look Across the Chain of Buyers
Individual companies in an industry often target different customer segments—for
example, large versus small customers. But an industry typically converges on a single
buyer group. The pharmaceutical industry, for example, focuses overridingly on
influencers: doctors. The office equipment industry focuses heavily on purchasers:
corporate purchasing departments. And the clothing industry sells predominantly to users.
Sometimes there is a strong economic rationale for this focus. But often it is the result of
industry practices that have never been questioned. Challenging an industry’s
conventional wisdom about which buyer group to target can lead to the discovery of new
Blue Ocean. By looking across buyer groups, companies can gain new insights into how
to redesign their value curves to focus on a previously overlooked set of buyers.
Think of Novo Nordisk, the Danish insulin producer that created a blue ocean in the
insulin industry…. [Novo Nordisk] saw that it could break away from the competition
and create a blue ocean by shifting the industry’s longstanding focus on doctors to the
users—patients themselves. In focusing on patients, Novo Nordisk found that insulin,
which was supplied to diabetes patients in vials, presented significant challenges in
administering. Vials left the patient with the complex and unpleasant task of handling
syringes, needles, and insulin, and of administering doses according to his or her needs.
Needles and syringes also evoked unpleasant feelings of social stigmatism for patients.
And patients did not want to fiddle with syringes and needles outside their homes, a
frequent occurrence because many patients must inject insulin several times a day. This
led Novo Nordisk to the blue ocean opportunity of NovoPen, launched in 1985.
NovoPen, the first user-friendly insulin delivery solution, was designed to remove the
hassle and embarrassment of administering insulin.

Look Across Strategic Groups within Industries


The key to creating a blue ocean across existing strategic groups is to break out of this
narrow tunnel vision by understanding which factors determine customers’ decisions to
trade up or down from one group to another.

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Consider Curves, the Texas-based women’s fitness company. Since franchising began in
1995, Curves has grown like wildfire, acquiring more than two million members in more
than six thousand locations, with total revenues exceeding the US$ 1 billion mark. A new
Curves opens, on average, every four hours somewhere in the world.
What’s more, this growth was triggered almost entirely through word of mouth and
buddy referrals. Yet, at its inception, Curves was seen as entering an oversaturated
market, gearing its offering to customers who would not want it, and making its offering
significantly blander than the competition’s. In reality, however, Curves exploded
demand in the U.S. fitness industry, unlocking a huge untapped market, a veritable blue
ocean of women struggling and failing to keep in shape through sound fitness. Curves
built on the decisive advantages of two strategic groups in the U.S. fitness industry—
traditional health clubs and home exercise programs—and eliminated or reduced
everything else.

Look Across Alternative Industries


In making every purchase decision, buyers implicitly weigh alternatives, often
unconsciously. Do you need a self-indulgent two hours? What should you do to achieve
it? Do you go to movie, have a massage, or enjoy reading a favorite book at a local café?
The thought process is intuitive for individual consumers and industrial buyers alike.
For some reason, we often abandon this intuitive thinking when we become sellers.
Rarely do sellers think consciously about how their customers make trade-offs across
alternative industries. A shift in price, a change in model, even a new ad campaign can
elicit a tremendous response from rivals within an industry, but the same actions in an
alternative industry usually go unnoticed. Trade journals, trade shows, and consumer
rating reports reinforce the vertical walls between one industry and another. Often,
however, the space between alternative industries provides opportunities for value
innovation.
Consider NetJets, which created the blue ocean of fractional jet ownership. In less than
twenty years NetJets has grown larger than many airlines, with more than five hundred
aircraft, operating more than two hundred fifty thousand flights to more than one hundred
forty countries. Purchased by Berkshire Hathaway in 1998, today NetJets is a

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multibillion-dollar business, with revenues growing at 30–35 percent per year from 1993
to 2000. NetJets’ success has been attributed to its flexibility, shortened travel time,
hassle free travel experience, increased reliability, and strategic pricing. The reality is that
NetJets reconstructed market boundaries to create this blue ocean by looking across
alternative industries.

SIX PATH FRAMEWORK

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The six convectional boundaries of competition

Industry

Strategic group

Buyer group
From Competing
within Scope of product and
service offering
To Creating across
Functional – emotional
orientation of an
industry

time

There are six basic approaches to remaking market boundaries. These approaches are
called the six paths framework. These paths have general applicability across industry
sectors, and they lead companies into the corridor of commercially viable blue ocean

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ideas. None of these paths requires special vision or foresight about the future. All are
based on looking at familiar data from a new perspective.

These paths challenge the six fundamental assumptions underlying many companies’
strategies. These six assumptions, on which most companies hypnotically build their
strategies, keep companies trapped competing in red oceans. Specifically, companies tend
to do the following:

• Define their industry similarly and focus on being the best within it

• Look at their industries through the lens of generally accepted strategic groups
(such as luxury automobiles, economy cars, and family vehicles), and strive to
stand out in the strategic group they play in

• Focus on the same buyer group, be it the purchaser (as in the office equipment
industry), the user (as in the clothing industry), or the influencer (as in the
pharmaceutical industry)

• Define the scope of the products and services offered by their industry similarly

• Accept their industry’s functional or emotional orientation

• Focus on the same point in time—and often on current competitive threats—in


formulating strategy

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FOUR ACTIONS UNDER BLUE OCEAN STRATEGY

The company
should identify
which factors
should be reduced
well below the
industry’s standard

The factors the


company takes for The company
granted should be should create
eliminated. factors that have
never been offered.
A NEW VALUE
CURVE

The company
should identify
which factors
should be raised
above industry’s
standard

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DEVELOPING A BLUE OCEAN STRATEGY

Creating New Market Space

If we do operate in an existing market that is highly competitive (red ocean), then that is not
necessary a bad thing but we believe it is vital to eliminate potential risk (competing in a Red
Ocean) and begin to identify how we can create uncontested market space(blue ocean)and make
the competition irrelevant.

Thinking Beyond Existing Boundaries

Consider being unconventional during our strategic planning process. Challenge yourself;
Challenge the performance of your existing services, products and delivery systems. Too many
organizations become complacent and fail to innovate themselves.

Identifying Non-Customers

There are customers out there who are not showing up on our radar screen. Capitalize on existing
demand but ensure you leave no stone unturned in exploring ways to create new customers. Who
should be your next customer? Who will be your customers in three to five years time? What do
you need to do to make them customers?

Challenging the Industry Cost

The industry we operate in has a degree of over capitalizations that is not adding value and is
simply not needed by your customers. Whether that is in product, service or delivery systems. You
need to identify these areas and eliminate them from your value proposition. Ultimately, we need
to be the leader in driving down the industry cost.

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COMPANIES USING BLUE OCEAN
STRATEGY
Samsung: Value Innovation is Samsung’s core tool for product development and
played a significant role in helping Samsung become the world’s top consumer
electronics company. Last year there were 2,000 employees working in cross-functional
teams on 90 Value Innovation projects at Samsung, and no product is introduced to the
market without first getting a Value Innovation Certificate. In 2003 the Digital Media unit
launched 40 new products using the VI process, and its first quarter profits were 50 times
higher than that of the same period the previous year.

Nokia: In 1991 trade with the Soviet Union, Finland’s and Nokia’s largest market,
collapsed overnight. At the time the company’s core activities were paper and rubber
products. By 1994 Nokia was selling off its industrial divisions and was listed on NYSE
as the world’s premier supplier of mobile phones, which was just a small, peripheral
division three years earlier.

IBM: Between 1991 and 1993 IBM recorded losses of USD 16 Billion and the future
was looking grim to say the least. In 1993 Lou Gerstner became CEO, the first company
leader who was not from within the company, in fact not even from within the industry.
He completely re-oriented the company’s focus from technology driven to customer
solution driven, so that by 2001 $35 Billion of $86 Billion total sales were from the
newly created Global Services. This radical shift in company culture and orientation is
widely accredited with IBM’s exemplary recovery to growth and healthy profitability.

CJ-GLS: CJ-GLS is a latecomer in the logistics industry, and its resources, such as the
number of trucks and warehouses, are relatively small in comparison to those of
established companies. But, it has achieved a distinct competitive advantage through
innovative information technology (i.e., RFID—radio frequency identification), which

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has enabled it to create an uncontested market space, electronic logistics business. One
remarkable fact about CJ-GLS is that its swift growth comes not from attracting
competitors’ customers from the existing Red Ocean market but from creating a Blue
Ocean market (3PL market), which previously existing incumbents ignored, and also
from constructing a new business model founded on a RFID-based, ubiquitous-oriented
3PL system. Analyzed through a Four Actions Framework and characterized as Blue
Ocean, this case study provides valuable information on how a company reinforces its
competitive advantage from the Red Ocean while it transitions into a Blue Ocean by
utilizing advanced information communication technologies.

Apple: Apple computers invented a new market with the iPOD digital music player.
The company’s idea was to create a portable music player so people could listen to it
anywhere. Apple has sold more than 10 million music players, adding $6.2 billion to the
company’s revenue.

Whirlpool: Whirlpool’s front-loading washer-dryer combo called the Duet, which the
company introduced to a well-saturated market in 2001. The Duet was tagged at US$
2,300, vs. US$ 600 a pair for most existing models, yet it became a sensation. Because
the Duet had features never seen before: It could wash big loads yet used very little water
and electricity, and cleaned better. It could also handle silks, lace, and comforters. But
best of all, it inspired real affection among women. They said that it changed their lives
because it saves them time and gave back some of their freedom, doing laundry in record
time.

Stokke: Norwegian furniture company Stokke entitled 'Hotweels' from Fast Company
(May 2005). When Stokke introduced the Xplory baby stroller in the U.S., priced at a
hefty US$ 749, it sold in the first nine weeks what it had planned to sell over six months.
Because it offers a package of unprecedented attributes: It’s flexible design makes life
easier for parents by allowing the seat to be raised to eye-level, to face either forward or
backward, and enabling the stroller to navigate any terrain. It’s flashy, futuristic form
creates a strong emotional bond.

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Netjets: NetJets, which created the blue ocean of fractional jet ownership. In less than
twenty years NetJets has grown larger than many airlines, with more than five hundred
aircraft, operating more than two hundred fifty thousand flights to more than one hundred
forty countries. Purchased by Berkshire Hathaway in 1998, today NetJets is a
multibillion-dollar business, with revenues growing at 30–35 percent per year from 1993
to 2000. NetJets’ success has been attributed to its flexibility, shortened travel time,
hassle free travel experience, increased reliability, and strategic pricing. The reality is that
NetJets reconstructed market boundaries to create this blue ocean by looking across
alternative industries.

Other companies using Blue Ocean Strategy are:

• 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
• Dell (mid-1990s).

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CONCLUSION
Blue Ocean Strategy is a portfolio of inter-related concepts and methodology allowing
companies to breakaway from head-on competition in order to create and maintain
uncontested market spaces of high customer value. The portfolio includes the whole
leadership gamut from Strategy Formation, Strategy Implementation, Organizational
Change and Staff Motivation.

Value Innovation is the first component of BOS, and provides the strategy formation
framework. Value Innovation is a highly pragmatic, visual methodology that allows
companies to challenge industry boundaries and taken for granted assumptions and in the
process discover highly distinctive and successful strategies. Value Innovation sets the
stage for the rest of the Blue Ocean Strategy concepts.

Blue Ocean Strategy is the most influential new concept in management strategy, whose
exciting premise is that companies can rearrange conventional factors of competition in
order to create a leap in customer value. In the process, companies make their
competition irrelevant and discover unoccupied market space (hence the shift from a
bloody, confined red sea to an expansive blue ocean).

The strategy outlines the premise, research, success examples and the so-called ‘Value
Innovation’ framework, which allows companies to create Blue Ocean Strategies and in
the process achieve:

• High-impact, customer-based innovations.


• Significant increase in speed to market, from idea formation to market
introduction.
• Significant decrease in development and operational costs.
• An innovation-focused and duly motivated organization.

BLUE OCEAN STRATEGY seeks to make the creation and capturing oceans as
systematic and actionable as competing in the red waters of known market space. For

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although blue ocean strategists have always existed, for the most part their strategies have
been largely unconscious. Blue ocean strategy seeks to remedy this by not only decoding
the pattern and principles behind the successful creation of blue oceans, but also
providing the analytical frameworks and tools to act on this insight.
A blue ocean is created in the region where a company's actions favorably affect both its
cost structure and it value proposition to buyers. Cost savings are made from 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.
Blue and red oceans have always coexisted. Practical reality, therefore, demands that
companies understand the strategic logic of both types of oceans. At present, however,
competing in red oceans dominates the field of strategy in theory and in practice. Part of
the reason traces back to the historical foundation of business strategy—war—where
territory is defined and limited and opponents compete to protect and enlarge their share
of limited and existing terrain. This focus on beating the competition in existing market
space was exasperated by the meteoric rise of the Japanese in the 1970s and 1980s. Faced
with mounting competition in the global marketplace as, for virtually the first time
incorporate history, customers were deserting Western companies in droves, the center of
strategic thinking gravitated further towards the competition. A slew of competition-
based strategies emerged which argued that competition is at the core of the success and
failure of firms, and that competition determines the appropriateness of a firm’s activities
that can contribute to its performance. The result has been a fairly good understanding of
how to compete skillfully in red waters, from analyzing the underlying economic
structure of an existing industry, to choosing a strategic position of low cost or
differentiation or focus, to benchmarking the competition. Yet, although some discussions
around blue oceans exist, little practical guidance exists to create and capture them.

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BIBLIOGRAPHY/ WEBLIOGRAPHY
• www.feedblitz.com, “Creating Blue Oceans” 26 november2006.
• www.12manage.com, “Blue Ocean strategy” 4 june2007.
• www.wikipedia.com
• www.gamasutra.com, “Nintendo’s Kaplan Discusses 'Blue Ocean' Strategy”
February 9, 2006.
• www.sciencedirect.com, “A strategy for third-party logistics systems: A case
analysis using the blue ocean strategy” 24 May 2007.
• www.emergic.org, “TECH TALK: Blue Ocean Strategy” May 1, 2006.
• www.blueoceanstrategy.com, “How we can develop a Blue Ocean Strategy for
your organization” January2007.
• Blue Ocean strategy by W Chan Kim and Renee Mourbogne
• Harward Business Review, “A Conversation with W. Chan Kim and Renee
Mauborgne authors of BLUE OCEAN STRATEGY”

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