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Maria Galarza | 3410 Business Strategy and PracticePART ONE – BLUE OCEAN STRATEGY
CHAPTER 1 – CREATING BLUE OCEANS
Cirque du Soleil – Market characteristics:
o Declining industry with limited potential for growth
o Supplier power (from star performers) was strong - Expensive
o Buyer power was strong
o Alternative forms of entertainment exponentially growing
o Sentiment against animal use – and were also very expensive
Thus, the circus industry appeared unattractive -> Cirque du Soleil created new market space and invented a new
form of live entertainment (glamorized tent and unprecedented entertainment experience with sophistication and
artistic richness) while dramatically reduced its cost structure (pricier tickets since the it appealed to adults and
corporate clients and no animal use).
NEW MARKET SPACE
The only way to beat the competition is to stop trying to beat the competition.
The market universe is composed of two sorts of oceans:
Red Oceans
All the industries in existence today. It is the known market space.
o The industry boundaries are defined and accepted.
o The competitive rules of the game are known.
o Companies try to outperform rivals to grab greater market share.
o Market space gets crowded. Thus, prospects for profits and growth are reduced.
o Products become commodities.
There is a choice between differentiation or low cost.
Consequently, sustaining high performance becomes extremely difficult -> Create blue oceans.
Blue Oceans
All the industries not in existence today. It is the unknown market space.
o It is defined by untapped market space, demand creation and opportunity for highly profitable growth.
o Most blue oceans are created from within red oceans by expanding existing industry boundaries and some
are created beyond existing industry boundaries.
o The rules of the game are waiting to be set. Thus, competition is irrelevant.
In addition, there is little practical guidance on how to create blue oceans (vs. red oceans).
Both differentiation and low cost should be pursued.
THE CONTINUING CREATION OF BLUE OCEANS
Although the term “blue oceans” is new, their existence is not.
100 years ago – Automobile industry, music recording industry, etc. did not exist.
30 years ago – Cell-phones industry, biotechnology industry did not exist.
This is because industries never stand still and continuously evolve: operations improve, markets expand, players
come and go.
Thus, it is difficult to sustain a red ocean strategy.
Fun Fact!
Corporate strategy is heavily influenced by its roots in military strategy:
Language: headquarters, officials, front line, etc.
Strategy is about confronting the opponent and fight (such as battles and war).
Thus, it is difficult for people to change the chip from red ocean to blue ocean.
THE IMPACT OF CREATING BLUE OCEANS
Study: quantify the impact of creating blue oceans.
Results:
THE RISING IMPERATIVE OF CREATING BLUE OCEANS
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