In blue oceans, you invent and capture new demand, and you offer customers a leap in value while also streamlining your costs. How to avoid the fray? Kim and Mauborgne recommend creating blue oceans-uncontested market spaces where the competition is irrelevant.

Ever-more-intense competition turns the water bloody. As the space gets increasingly crowded, profit and growth prospects shrink. In those red oceans, companies try to outperform rivals to grab bigger slices of existing demand. The best way to drive profitable growth? Stop competing in overcrowded industries. So powerful is blue ocean strategy, in fact, that a blue ocean strategic move can create brand equity that lasts for decades. The most appropriate unit of analysis is the strategic move, the set of managerial actions and decisions involved in making a major market-creating business offering.Ĭreating blue oceans builds brands.

In studying more than 150 blue ocean creations in over 30 industries, the authors observed that the traditional units of strategic analysis-company and industry-are of limited use in explaining how and why blue oceans are created. But it’s much more common for a blue ocean to be created from within a red ocean when a company expands the boundaries of an existing industry. One is to launch completely new industries, as eBay did with online auctions. There are two ways to create blue oceans. Products turn into commodities, and increasing competition turns the water bloody. As the market space gets more crowded, prospects for profits and growth decline. In red oceans-that is, in all the industries already existing-companies compete by grabbing for a greater share of limited demand.

There is ample opportunity for growth that is both profitable and rapid. In blue oceans, demand is created rather than fought over. Rather than competing within the confines of the existing industry or trying to steal customers from rivals, Cirque developed uncontested market space that made the competition irrelevant.Ĭirque created what the authors call a blue ocean, a previously unknown market space. Despite a long-term decline in the circus industry, Cirque du Soleil profitably increased revenue 22-fold over the last 10 years by reinventing the circus.

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