Blue Ocean Strategy: A Special kind of Offensive

This strategy seeks to gain a dramatic and durable competitive advantage by abandoning
efforts to beat out competitors in existing markets and, instead, inventing a new industry or
distinctive market segment (wide- open blue ocean of possibility) that renders existing
competitors largely irrelevant and allows a company to create and capture altogether new
demand.

This strategy views the business universe as consisting of two distinct type of market
space. One is where the industry boundaries are defined and accepted, the competitive rules of
the game are well understood by industry members, and companies try to outperform rivals by
capturing a bigger share of the existing demand. In the second type of market space, the industry
does not really exist yet, and offers wide-open opportunities for profitable and rapid growth if a
company can come up with a product offering and strategy that allows it to create new demand
rather than fight over existing demand.

The best example of such a blue ocean strategy is the online auction industry that eBay
created and now dominates.

Another company that has employed a blue ocean strategy is Cirque du Soleil, which
increased its revenues by 22 times during the 1993-2003 periods in the circus business, an
industry that had been in long time decline for 20 years. Cirque du Soleil, pulled this off against
legendary industry leader Ringling Bros. and Barnum & Bailey. By reinventing the circus,
creating a distinctively different market space for its performances (Las Vegas nightclubs and
theatre-type settings), and pulling in a whole new group of customers – adults and corporate
clients – who were noncustomers of traditional circuses and were willing to pay several times
more than the price of a conventional circus ticket to have an “entertainment experience”. It
studiously avoided the use of animals because of costs and also due to the concerns over their
treatment by traditional circus organizations. Cirque’s market research led management to
conclude that only three factors are expected: the clowns, classic acrobatic acts, and tent-like
stage.
 Choosing Which Rivals to Attack:

Offence – minded firms need to analyze which of their rivals to challenge as well as how
to mount that challenge. The following are the best target for offensive attacks:

• Market leaders that are vulnerable – offensive attacks made good sense when a company
that leads in terms of size and market-share is not a true leader in terms of serving the
market well. Some symptoms of this are, unhappy buyers, an inferior product line, a
weak competitive strategy with regard to low – cost leadership or differentiation, strong
emotional commitment to an aging technology the leader has pioneered, outdated plants
and equipment, a preoccupation with diversification into other industries, and mediocre
or declining profitability. Caution is well advised in challenging strong market leaders –
there’s a significant risk of squandering valuable resources in a futile effort or
precipitating a fierce and profitless industrywide battle for market share.

• Runner up firms with weaknesses in areas where the challenger is strong – runner up
firms are an especially attractive target when a challenger’s resource strengths and
competitive capabilities are well suited to exploiting their weaknesses.

• Struggling enterprises that are on the verge of going under – challenging a hard –
pressed rival in ways that further sap its financial strength and competitive position can
weaken its resolve and hasten its exit from the market.

• Small local and regional firms with limited capabilities – because small firms typically
have limited expertise and resources, a challenger with broader capabilities is well
positioned to raid their biggest and best customers – particularly those who are growing
rapidly, have increasingly sophisticated requirements, and may already be thinking about
switching to a supplier with more full – service capability.