Blue Ocean Strategy PDF Book by Renée Mauborgne and W. Chan Kim


Click here to Download Blue Ocean Strategy PDF Book by Renée Mauborgne and W. Chan Kim English having PDF Size 2.4 MB and No of Pages 257.

ONE TIME ACCORDION PLAYER, stilt-walker, and fireeater, Guy Laliberté is now CEO of Cirque du Soleil, one of Canada’s largest cultural exports. Created in 1984 by a group of street performers, Cirque’s productions have been seen by almost forty million people in ninety cities around the world.

Blue Ocean Strategy PDF Book by Renée Mauborgne and W. Chan Kim

Name of Book Blue Ocean Strategy
Author Renée Mauborgne and W. Chan Kim
PDF Size 2.4 MB
No of Pages 257
Language  English
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About Book – Blue Ocean Strategy PDF Book

In less than twenty years Cirque du Soleil has achieved a level of revenues that took Ringling Bros. and Barnum & Bailey—the global champion of the circus industry—more than one hundred years to attain. What makes this rapid growth all the more remarkable is that it was not achieved in an attractive industry.

But rather in a declining industry in which traditional strategic analysis pointed to limited potential for growth. Supplier power on the part of star performers was strong. So was buyer power. Alternative forms of entertainment—ranging from various kinds of urban live entertainment to sporting events to home entertainment—cast an increasingly long shadow.

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Children cried out for PlayStations rather than a visit to the traveling circus. Partially as a result, the industry was suffering from steadily decreasing audiences and, in turn, declining revenue and profits. management consulting were unheard of or had just begun to emerge at that time. Now turn the clock back only thirty years.

Again, a plethora of multibillion-dollar industries jumps out—mutual funds, cell phones, gas-fired electricity plants, biotechnology, discount retail, express package delivery, minivans, snowboards, coffee bars, and home videos, to name a few. Just three decades ago, none of these industries existed in a meaningful way.

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Now put the clock forward twenty years—or perhaps fifty years— and ask yourself how many now unknown industries will likely exist then. If history is any predictor of the future, again the answer is many of them. The reality is that industries never stand still. They continuously evolve.

Operations improve, markets expand, and players come and go. History teaches us that we have a hugely underestimated capacity to create new industries and re-create existing ones. In fact, the half-century-old Standard Industrial Classification (SIC) system published.

By the U.S. Census was replaced in 1997 by the North America Industry Classification Standard (NAICS) system. The new system expanded the ten SIC industry sectors into twenty sectors to reflect the emerging realities of new industry territories.5 The services sector under the old system. Blue Ocean Strategy PDF Book

For example, is now expanded into seven business sectors ranging from information to health care and social assistance.6 Given that these systems are designed for standardization and continuity, such a replacement shows how significant the expansion of blue oceans has been.

Yet the overriding focus of strategic thinking has been on competition-based red ocean strategies. Part of the explanation for this is that corporate strategy is heavily influenced by its roots in military strategy. The very language of strategy is deeply imbued with military references—chief executive “officers” in “headquarters,” “troops” on the “front lines.”

Described this way, strategy is about confronting an opponent and fighting over a given piece of land that is both limited and constant.7 Unlike war, however, the history of industry shows us that the market universe has never been constant; rather, blue oceans have continuously been created over. Blue Ocean Strategy PDF Book

Although economic conditions indicate the rising imperative of blue oceans, there is a general belief that the odds of success are lower when companies venture beyond existing industry space.26 The issue is how to succeed in blue oceans.

How can companies systematically maximize the opportunities while simultaneously minimizing the risks of formulating and executing blue ocean strategy? If you lack an understanding of the opportunity-maximizing and riskminimizing principles driving the creation and capture of blue oceans, the odds will be lengthened against your blue ocean initiative.

Of course, there is no such thing as a riskless strategy. Strategy will always involve both opportunity and risk, be it a red ocean or a blue ocean initiative. But at present the playing field is dramatically unbalanced in favor of tools and analytical frameworks to succeed in red oceans. Blue Ocean Strategy PDF Book

As long as this remains true, red oceans will continue to dominate companies’ strategic agenda even as the business imperative for creating blue oceans takes on new urgency. Perhaps this explains why, despite prior calls for companies to go beyond existing industry space, companies have yet to act seriously on these recommendations.

This book seeks to address this imbalance by laying out a methodology to support our thesis. Here we present the principles and analytical frameworks to succeed in blue oceans. Chapter 2 introduces the analytical tools and frameworks that are essential for creating and capturing blue oceans.

Although supplementary tools are introduced in other chapters as needed, these basic analytics are used throughout the book. Companies can make proactive changes in industry or market fundamentals through the purposeful application of these blue ocean tools and frameworks, which are grounded in the issues of both opportunity and risk. Blue Ocean Strategy PDF Book

A high score means that a company offers buyers more, and hence invests more, in that factor. In the case of price, a higher score indicates a higher price. We can now plot the current offering of wineries across all these factors to understand wineries’ strategic profiles, or value curves.

The value curve, the basic component of the strategy canvas, is a graphic depiction of a company’s relative performance across its industry’s factors of competition. Figure 2-1 shows that, although more than one thousand six hundred wineries participate in the U.S. wine industry.

From the buyer’s point of view there is enormous convergence in their value curves. Despite the plethora of competitors, when premium brand wines are plotted on the strategy canvas we discover that from the market point of view all of them essentially have the same strategic profile. Blue Ocean Strategy PDF Book Download

They offer a high price and present a high level of offering across all the key competing factors. Their strategic profile follows a classic differentiation strategy. From the market point of view, however, they are all different in the same way. On the other hand, budget wines also have the same essential strategic profile.

Their price is low, as is their offering across all the key competing factors. These are classic low-cost players. Moreover, the value curves of premium and low-cost wines share the same basic shape. The two strategic groups’ strategies march in lockstep, but at different altitudes of offering level.

To set a company on a strong, profitable growth trajectory in the face of these industry conditions, it won’t work to benchmark competitors and try to outcompete them by offering a little more for a little less. Such a strategy may nudge sales up but will hardly drive a company to open up uncontested market space. Blue Ocean Strategy PDF Book Download

Nor is conducting extensive customer research the path to blue oceans. Our research found that customers can scarcely imagine how to create uncontested market space. Their insight also tends toward the familiar “offer me more for less.” And what customers typically want “more” of are those product and service features that the industry currently offers.

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. Blue Ocean Strategy PDF Book Download

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 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, hasslefree 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. The most lucrative mass of customers in the aviation industry are corporate travelers. NetJets looked at the existing alternatives and found that when business travelers want to fly, they have two principal choices. Blue Ocean Strategy PDF Book Download

On the one hand, a company’s executives can fly business class or first class on a commercial airline. On the other hand, a company can purchase its own aircraft to serve its corporate travel needs. The strategic question is, Why would corporations choose one alternative industry over another?

By focusing on the key factors that lead corporations to trade across alternatives and eliminating or reducing everything else, NetJets created its blue ocean strategy. Consider this: Why do corporations choose to use commercial airlines for their corporate travel?

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. Blue Ocean Strategy PDF Book Free

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. Blue Ocean Strategy PDF Book Free

Consider NABI, a Hungarian bus company. It applied path 4 to the $1 billion U.S. transit bus industry. Since the company launched this new emotional orientation of Cemex cement coupled with its funding and technical services, demand for cement has soared.

Around 20 percent more families are building additional rooms, and families are planning to build two to three more rooms than originally planned. In a market that competed on price with slow growth, Cemex enjoys 15 percent monthly growth, selling its cement at higher prices (roughly 3.5 pesos.

Cemex has so far tripled cement consumption by the mass of do-it-yourself homebuilders—from 2,300 pounds consumed every four years, on average, to the same amount being consumed in fifteen months. The predictability of the quantities of cement sold through the supertandas also drops Cemex’s cost structure via lower inventory costs. Blue Ocean Strategy PDF Book Free

Smoother production runs, and guaranteed sales that lower costs of capital. Social pressure makes defaults on supertanda payments rare. Overall, Cemex created a blue ocean of emotional cement that achieved differentiation at a low cost.

Similarly, with its wildly successful Viagra, Pfizer shifted the focus from medical treatment to lifestyle enhancement. Likewise, consider how Starbucks turned the coffee industry on its head by shifting its focus from commodity coffee sales to the emotional atmosphere in which customers enjoy their coffee.

A burst of blue ocean creation is under way in a number of service industries but in the opposite direction—moving from an emotional to a functional orientation. Relationship businesses, such as insurance, banking, and investing, have relied heavily on the emotional bond between broker and client. Blue Ocean Strategy PDF Book Free

They are ripe for change. Direct Line Group, a U.K. insurance company, for example, has done away with traditional brokers. It reasoned that customers would not need the hand-holding and emotional comfort that brokers traditionally provide if the company did a better job of, for example, paying claims rapidly and eliminating complicated paperwork.

Today the iTunes Music Store offers more than 700,000 songs and has sold more than 70 million songs in its first year, with users downloading on average 2.5 million per week. Nielsen//NetRatings estimates that the iTunes Music Store now accounts for 70 percent of the legal music download market.

Apple’s iTunes is unlocking a blue ocean in digital music, with the added advantage of increasing the attractiveness of its already hot iPod player. As other online music stores enter the fray, the challenge for Apple will be to keep its sights on the evolving mass market and not to fall into competitive benchmarking or high-end niche marketing. Blue Ocean Strategy PDF Book Free