Red Ocean and Blue Ocean Strategy by Siegemund, Carsten. Blue Ocean Strategy.

1. Red Ocean: Why Do the industries name the red ocean?
The known market space which include the all existing industries as off now. Boundaries of these market is defined and where
competitors have accepted competition rules. Where number of customers are fixed and customers expectations is also fixed.
Industries accept underlaying boundaries, do not questions market scenario. They fix their market as others, They accept
strategies an generally, Normally focus on same key targets, offer services and goods as offered by their competitors and offer
same time line in formulating strategy.
As per authors research shows that 86 percent of the new venture generated 62 percent of the total revenues and 39 percent of
total profits. Similarly only 14 percent of the launches were focused on new business opportunities and created blue oceans.
These launches generated 28 percent of revenues and 61 percent of total profits.
Looking in to the results show that performance can be increased by creating blue ocean.
39
62
86
61
38
14
0 10 20 30 40 50 60 70 80 90 100
Profit Impact
Revenue Impact
Business Launch
The Profit and Growth Consequences of Creating
Blue Oceans
Red Ocean Blue Ocean

2. Value Innovation: The Cornerstone of Blue Ocean Strategy.
The main focus of the strategy is to eliminate the existing market competition, by creating value innovation. Value innovation
make company's position favorable to cost and value proposition to byers. Buyers value can be lifter by offering valuable means
that never offered earlier. So simultaneously value for buyers to be increase along with cost reduction.
Cost
VI
Buyer
Value
Value Innovation
Blue Ocean Strategy
Eliminate
Reduce
Raise
Create
On one hand the value to the company is
based on its cost structure and the price
for the product. On the other hand the
value to the buyers is determined by the
price and the utility of the company’s
offering.

3. Strategy Canvas:
Strategic Canvas is a diagnostic tool and action framework both. Companies current position or situation in market is describe,
first. Two axis represent Range of factors (Horizontal) competing or investing in, and second is level of value offered (Vertical). By
plotting every factors with variable conditions, it reveals relative performance in its relevant market.
Value curve need to be set in relation with current situation of the company within the market for getting qualitative results.
• Company fit in blue ocean strategy – When a ventures
curve is meeting the all criteria of blue ocean strategy.
Value speak to the customers.
• A company caught in the red ocean - When a company’s
value curve converges with its competitors than the
company is acting on a red ocean.
• Overdeliver without payback - When all factors are on
high level.
• An incoherent strategy - When a venture value curve can
be described as ‘low-high-low-low-high’ – it signals that
the company does not have any coherent strategy.
• Strategic contradictions – Only considering higher value
over other factors.

4. Southwest Airlines focuses with their new value curve
on the factors ‘friendly service’, ‘speed’ and ‘frequent
point-to point departures’. On the other side the
factors ‘price’, ‘meals’, ‘lounges’, ‘seating class
choices’ and ‘hub connectivity’ were reduced. The
company created a blue ocean by giving the customer
the possibility to use a high speed transport with
frequent departures and attractive prices. To achieve
this, Southwest Airlines eliminates and reduces
several variables used as competition factors within
the industry and declares them irrelevant for their
new target group of customers, in order to reallocate
their resources into the new focus.
Example of Southwest Airlines:
Regarding the strategic profile of Southwest Airlines it illustrates it different value curve compared to the average
airlines in the US and to the alternative way to travel: car transport (figure 4-4).

5. Four Actions Framework: It is always necessary to answer following four key questions to
evaluate business model.
Eliminate – Which of the factors that the industry takes for granted should be eliminated?
Reduce – Which factors should be reduced well below the industry’s standard?
Raise – Which factors should be raised well above the industry’s standard?
Create – Which factors should be created that the industry has never offered?
Which factors should be reduced
well below the industry’s standard?
Luggage Transport, Services, Meal
Which factors should be raised well
above the industry’s standard?
Frequency of flight, Number of
Destinations
Which factors should be created that
the industry has never offered?
New Services, New-Check in Method,
New Distribution way, New Type of
Transport
Which of the factors that the
industry takes for granted should
be eliminated?
Meal, Drinking, free Magazine
The Four Actions Framework
of ‚Southwest Airlines’
Reference for PPT:-
Siegemund, Carsten. Blue Ocean Strategy for small and mid-
sized companies in Germany : Development of a consulting
approach, Diplomica Verlag, 2008. ProQuest Ebook Central,
http://ebookcentral.proquest.com/lib/globalnxt-
ebooks/detail.action?docID=594363.