Lecture Notes: Blue Ocean Strategy

Introduction to Blue Ocean Strategy

• Importance of competition in business.
• Book recommendation: "The Blue Ocean Strategy".
  • Essential for entrepreneurs.
  • Should be studied like a textbook.

Market Division: Blue Ocean vs. Red Ocean

• Blue Ocean
  • No competition, rules are not set.
  • High potential for profitable growth.
• Red Ocean
  • Crowded market, known rules.
  • Intense competition, shrinking profits, and growth.

Study on Market Strategies

• Study of 108 companies showed key insights:
  • 86 companies focused on existing markets, yielding 39% of profits.
  • 14 companies created new markets, yielding 61% of profits.

Core Principle: Value Innovation

• Providing higher value at lower cost.
• Example: Casella Wines using a strategy canvas and four actions framework.

Strategy Canvas Tool

• Analyzes market offerings and customer value.
• Horizontal axis: competition offerings.
• Vertical axis: customer value.

Four Actions Framework

• Eliminate: Remove unnecessary factors.
• Reduce: Lower factors below industry standard.
• Raise: Increase factors above industry standard.
• Create: Innovate new offerings.

Case Study: Casella Wines

• Eliminated complexity and aging.
• Reduced wine variety to two types.
• Raised prices moderately above budget wines.
• Created an easy-to-drink wine targeting non-traditional wine drinkers.

Main Idea of Blue Ocean Strategy

• Create new markets, make competition irrelevant.

Six Path Framework for Blue Ocean Opportunities

1. Functional vs. Emotional Appeal
   • Transform product appeal between functional and emotional.
2. Alternate Industries
   • Look beyond own industry for innovation.
3. Complementary Products/Services
   • Consider entire customer experience.
4. Strategy Groups within Industry
   • Combine attractive factors of different groups.
5. Chain of Buyers
   • Target different buyers (users, purchasers, influencers).
6. Looking Across Time
   • Identify and leverage industry trends.

Examples and Case Studies

• Starbucks: Emotional appeal in functional product.
• QB House: Functional shift in service.
• Ford Model T: Innovation from alternate industry.
• NetJets: Fractional jet ownership,
• Novo Nordisk: Shifting target from doctors to patients.
• Philips: Innovation in tea kettle industry.

Conclusion

• Blue Ocean Strategy focuses on breaking away from competition.
• Offers practical tools and frameworks for innovation.
• Useful for entrepreneurs seeking growth and differentiation.