The BLue Ocean Strategy theory

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Blue Ocean Strategy Presented by Sugiharto, SH. MM

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Prof Renee Mauborgne © JOHN ABBOTT Prof Chan Kim © JOHN ABBOTT The BLUE OCEAN STRATEGY The Main Reference

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The BLUE OCEAN STRATEGY The Blue Market & Red Market Red oceans and blue oceans make up market universe Blue Oceans Red Oceans represent all industries in existence today. Known as Market Space represent all industries NOT in existence today . Unknown Market Space They have defined rules, competitors, and market boundaries. Include: This is undefined market space, otherwise known as OPPORTUNITY. Competitions Price Wars Market Share Strategic Positioning Value Innovations Create new Demand Focus Differentiation New Market-place

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The BLUE OCEAN STRATEGY The Red Ocean Perspective Companies try to outperform rivals Market space gets crowded causing prospects for profit and growth reduced Products become commodities Red Ocean strategy is a Market Competing Strategy

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The BLUE OCEAN STRATEGY The Red Ocean Perspectives

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The BLUE OCEAN STRATEGY The Blue Ocean Perspective Blue Oceans defined as Undefined Market Space The Demand Creation Opportunity for Highly Profitable Growth Most are created from within Red Oceans By expanding existing industry boundaries Rule of The Games waiting to be set Competition Irrelevant Blue Ocean Strategy is a Market Creating Strategy

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The BLUE OCEAN STRATEGY The Blue Ocean Perspective The “Blue Ocean” is not new concept but only the Phrase is new. Think of what industries existed in 90-ies The DVDs, PlayStation, Energy drink, mobile phone camera, laptops, IPod (personal entertainment) etc. All of these industries created new market space

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The BLUE OCEAN STRATEGY The Blue Ocean Rising Supply is exceeding demand in most industries Problems The Shrinking of Profit Margins Increasing Price Wars Accelerated commodization of products and services Global competition is intensifying As red oceans are becoming bloodier and hard, “The only way to beat the competition is to stop trying to beat the competition!”

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The BLUE OCEAN STRATEGY The Blue Ocean Rising Industries never stand still, constantly evolving Significant expansion of blue oceans over years So why the focus on Red Ocean strategy?

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The BLUE OCEAN STRATEGY The Corporate Strategy Corporate strategy influenced by military strategy Need to create new market space that is uncontested

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The BLUE OCEAN STRATEGY The Read Ocean versus Compete in existing Market Space Beat in Competition Exploit Existing Demand Make the Value-cost trade off Align the whole system of a firm’s Activities with its strategic choice of differentiation or low cost Value Creation or added value The BLUE OCEAN STRATEGY The Blue Oceans Create uncontested Market Space Make the Competition irrelevant Create and Capture new Demand Break the Value-cost trade off Align the whole system of a firm’s Activities in pursuit of differentiation and low cost Value Innovation = innovative value

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The BLUE OCEAN STRATEGY The Corporate Strategy To win in the future, companies must stop competing with each other. The only way to beat the competition is to stop trying to beat the competition

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Some of this change is due to technology. Other reasons might be culture, globalization, speed of new information, or the role of demographics in the workplace The BLUE OCEAN STRATEGY The Blue Ocean Rising The business environment in which most business strategy and management has been based on is … Changing Evolving Disappearing

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The BLUE OCEAN STRATEGY The Value Innovation Value innovation is the “new” strategic logic behind Blue Ocean Strategy. Instead of focusing on beating the competition, you focus on making it irrelevant by creating a leap in value for buyers and creating uncontested market space

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The BLUE OCEAN STRATEGY The Value Innovation only occurs when … organizations have aligned innovation with utility , price and costs. The market must be ready to accept the product, meaning that The focus is on both differentiation and low cost to provide value to both customers and the organization TIMING IS KEY

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The BLUE OCEAN STRATEGY The Graph of Value Innovation Costs Buyer Value The Value Innovation Equal emphasis on value and innovation Defies value-cost trade-off of competition-based strategy Drives down costs while driving up buyers’ value

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The BLUE OCEAN STRATEGY The Point of Views Business often look at the industry from a structuralist (supply) point of view Try to looked at the industry from a reconstructionist (demand) point of view? Market boundaries are not viewed as given, but could be reconstructed to unlock new demand

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High Low V 1 C 1 Cost Quality High High High Low Low Low Quality Cost • • D LC V 1 C 1 Red Ocean Strategy Blue Ocean Strategy Structuralist Reconstructionist The BLUE OCEAN STRATEGY The Generic Strategy versus Value Innovations

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The BLUE OCEAN STRATEGY The Blue Oceans Strategy Tools Strategy Canvas A diagnostic tool for building a compelling blue ocean strategy It captures the current state of play in the known market space Allow you to understand : where the competition is currently investing the factors the industry currently competes on in product, service and delivery what customers receive from existing competitive offerings on the market

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The BLUE OCEAN STRATEGY 4 Actions to Create The Blue Oceans Eliminate Reduce Raise Create What factors should be raised well beyond the industry standard? Which factors should be reduced well below the industry’s standard? Which factors should be raised well above the industry’s standard? Which factors should be created that the industry has never offered?

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Eliminate Reduce Raise Create A New Value Curve The BLUE OCEAN STRATEGY The Blue Oceans Case 4 Actions Framework

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The BLUE OCEAN STRATEGY The Blue Oceans Case Eliminate Menabung tidak sekedar mencari bunga Menabung tidak bisa dijadikan trend gaya hidup Reduce Mengurangi jumlahTeller Create Menabung berhadiah besar Account BCA sebuah lifestyle Raise Produk tabungan Memperluas jaringan ATM Kemudahan bertransaksi

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The BLUE OCEAN STRATEGY The Blue Oceans 6 principles strategy FORMULATION Principles EVALUATION Principles Focus on the big picture, not the numbers Reconstruct market boundaries Get the strategic sequence right Reach beyond existing demand Overcome key organizational hurdles Build execution into strategy

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THANK YOU For LISTENING Blue Ocean Strategy Presented by Sugiharto , SH. MM Re-programmed Presentation created by ugik013 Presentation Pro Images provided by Personal collections Closing theme performed by D’Masiv – Jangan Menyerah E-mail: ugik013@yahoo.com STIE GICI Business School © 2011