Group 4

Carly Buell
Ryan Buell
Brian Cote
Shana Hartford
April Miller
Brittany Snethkamp
Austin Stewart
Blue Ocean Strategy
The first principle of blue ocean strategy is to
reconstruct market boundaries to break from the
competition and create blue oceans.
The challenge is to successfully identify, out of all the
possibilities that exist, commercially compelling blue
ocean opportunities.
Systematic Patterns
There are clear patterns for creating blue oceans.
There are six basic approaches to remaking market
boundaries.
These paths challenge the six fundamental
assumptions, on which most companies build their
strategies, that keep companies trapped competing in
red oceans.
The Six Paths Framework
1. Look Across Alternative Industries
2. Look Across Strategic Groups Within Industries
3. Look Across the Chain of Buyers
4. Look Across Complementary Product and Service
Offerings
5. Look Across Functional or Emotional Appeal to
Buyers
6. Look Across Time
Path 1: Look across alternative
industries
Alternatives broader than substitutes
Substitutes: products/services that have different
forms but same functionality
Alternatives: products/services that have different
functions and forms, but same purpose
Example
Installing financial software packages on a personal
computer, hiring a CPA, using pencil and paper
3 substitutes to finding the same solution- Sorting out
personal finances
Cinemas vs. Restaurants
Restaurants: offer conversational and gastronomical
pleasure
Cinemas: visual entertainment
Same objective: people enjoying a night out- therefore
they are alternatives of each other
Making a purchase decision
Consumers weigh consciously, and unconsciously,
the alternatives to a decision
Do I need self-indulgent 2 hours?
What do I need to do to achieve it?
Do I go to a movie, a massage, or go read a book?

Both individual consumers, and industrial buyers partake

in a similar thought process
Sellers
Sellers often forego the intuitive thinking process
Don’t take into account the tradeoffs their consumers
have
Space between alternatives= opportunities for value
innovation
NetJets
Blue ocean of frictional jet ownership
In less than 20 years, they have become the fastest
growing airline company
Over 500 aircraft
Operating in over 40 countries
Purchased by Berkshire Hathaway in 1998
Revenue growth from 30-35% each year
NetJets reconstructed market boundaries to create their
blue ocean by looking across alternative industries
Why do corporations use commercial airlines for their
travel?
Costs.
NetJets offers customers 1/16th ownership of an aircraft
shared with 15 other customers, each receive 50 hours of
flight time per year for $375,000
Customers receive convenience of private jet at the price
of a commercial airline ticket
Due to NetJets smaller airplanes, use of smaller regional
airports, and limited staff, their costs are kept to a
minimum
NTT DoCoMo’s i-mode
Largest telecommunications company in Japan
Changed the way people communicate and access
information
Created blue ocean by thinking of why people trade
across alternatives of mobile phones and the internet
Deregulation of telecommunication industry in
Japan, it was easy for new competitors to enter the
market
Result: rising costs, and the average revenue per
consumer fell
Broke out of red ocean by creating wireless
transmission of voice, text, data, and pictures
Creating a blue ocean
What are the alternatives industries to your industry?
Why do customers trade across them?
Focus on key factors and eliminate everything else,
creating a blue ocean of new market space is possible
Path 2: Look Across Strategic
Groups within Industries
Strategic Groups- a group of companies within an
industry that pursue a similar strategy

Example: Mercedes, BMW, and Jaguar all focus

on outcompeting one another in the luxury car
segment versus economy car makers who focus on
excelling over one another in their strategic
group.
The key to creating a blue ocean
across existing strategic groups is to
understand which factors determine
customers’ decisions to trade up or
down from one group to another.
Example:
Example: Curves
Texas-based women’s fitness company
- Created a veritable blue ocean demand for women
struggling and failing to keep in shape through
sound fitness.
- Built on the distinctive strengths of two strategic
groups –traditional health clubs and home exercise
programs –and eliminated everything else
- Question is, What makes women trade either up or
down from these two strategic groups?
- Curves’ low-cost business model makes its
franchises easy to afford and are profitable within
the first couple of months
- Curves facilities now exist in most towns all over the
U.S. and North America and have expanded into
Europe
Other Companies that have created blue
oceans by looking across strategic groups
Polo Ralph Lauren
Toyota’s Lexus as a Luxury Car
Sony’s Walkman in the late 1970s
Champion Enterprises prefabricated housing
Creating a blue ocean
What are the strategic groups in your industry?
Why do customers trade up for the higher group, and
why do they trade down for the lower one?
The key is to combine the most attractive factors of
both groups and eliminate or reduce everything else.
Path 3: Look Across the Chain of Buyers
Typically, an industry concentrates on who the single
target buyer is.
In reality, there is a chain of “buyers” who are directly
or indirectly involved in the buying decision.
purchasers, users, and influencers
Each hold different definitions of value.
Individual companies in an industry often target
different customer segments.
large vs. small customers
An industry typically converges on a single buyer
group
Pharmaceutical industry influencers
Office Equipment industry purchasers
Clothing industry users
Look Across the Chain of Buyers…
 Challenging an industry’s conventional
understanding 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.
Ex: Novo Nordisk created a blue ocean in the
insulin industry and transformed from an insulin
producer to a diabetes care company.
Industry focused on key influencers (doctors)
Nordisk saw that it could break away from the
competition by shifting the company’s thinking
to users(patients) rather than doctors.
-NovoPen = the 1st user-friendly insulin delivery
system
-NovoLet = prefilled disposable insulin pen
-Innovo = electronic memory records designed to
manage and reduce risk of missing a dose
EX: Bloomberg created a value curve new to the industry of
business information providers by shifting its focus
upstream from purchasers to users
Industry focused on purchasers (IT managers)
Bloomberg disagreed and saw the users (traders & analysts)
were making the crucial decisions for their employers
-Designed system to offer users better value with a easy-to-
use, broker-friendly computer system
-Also added information and purchasing services to enhance
their personal lives
In return the traders & analysts exerted their power within
the firm to drive IT managers to purchase from Bloomberg.
By questioning who can and should be the target
buyer, companies can create blue oceans.
Ask:
What is the chain of buyers in your industry?
Which buyer group does your industry typically focus
on?
If you shifted the buyer group of your industry, how
could you unlock new value?
Path 4: Look Across
Complementary Product and
Service Offerings
What is the context in which your product or
service is used?
What happens before, during, and after?
Can you identify the pain points?
How can you eliminate these pain points through a
complementary product or service offering?
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.
Examples:
Barnes & Noble
Virgin Entertainment’s Megastores
Dyson Vacuums
Zeneca’s Salick Cancer Centers
Phase 5: Look Across Functional or
Emotional Appeal to Buyers
What Industries should compete on
Rational appeal
Emotional appeal
Appeal usually a result of how companies have
competed in the past
Ex: Functionally oriented companies become more
functionally oriented
 Change
Emotionally oriented industries offer extras at extra
price without enhancing functionality
By stripping those extras it would create a
fundamentally simpler business model
Functionally oriented industries can add emotion to
their products to stimulate demand
Quick Beauty House
Traditional Japanese haircuts
Most haircuts in Japan took around an hour because of
rituals
Actual cutting of hair was just a fraction of that time
Price was around $27 to $45
QB House
Decided working professionals did not want to waste an
hour
Stripped the emotional service of the haircut
Focused on basic cuts
Cut time from one hour to 10 minutes
Price was reduced to around $9
 Cemex
World’s third-largest cement producer
Created a blue ocean by going from functional to
emotional
Cement houses were the dreams of the people of
Mexico
Most could never afford it because extra money was
always spent on village festivals, baptisms, etc.
Launched Patrimonio Hoy: Shifted orientation from
functional to emotional.
Foundation of tandas
While competitors were selling cement, Cemex was
selling dreams
Path 6: Look Across Time
All industries are subject to external trends that effect
their businesses over time
Internet
“Going green” to protect the planet
Most companies adapt incrementally and somewhat
passively as trends emerge.
They focus on projecting the trend itself and pace
themselves to keep up with the trend they are tracking.
So how to get out of Red oceans and develop a blue
ocean strategy?
Creating a Blue ocean Strategy
Blue oceans arise from business insights into how the
trend will change value to customers and impact the
company’s business model.

Three Principles to assessing trends over time:

1. Trends must be decisive to your business
2. Trends must be irreversible
3. Trends must have a clear trajectory

Example: The Asian Crisis of 1997 vs. the Euro

Creating a Blue Ocean Strategy
To create a blue ocean one must look into the future and
imagine what a developing trend will look like at its logical
conclusion. Then work back from that point to see what
can be changed today to meet that goal.

 Digital music downloading: Apple’s iTunes

 Legal, easy to use, flexible
 While more digital music stores enter the market, Apple has kept
developing a blue ocean with the creation of the iPhone.

 High-Speed data exchange: Cisco Systems

 Rise in Globalization: CNN 24 hour global news network

Questions to ask as you look
across time:
What trends have a high probability of impacting
your industry, are irreversible, and are evolving in a
clear trajectory?
How will these trends impact your industry?
Given this, how can you open up unprecedented
customer utility?