Strategic Management: Blue Ocean Strategy and Case Analysis

This report provides an overview of the Blue Ocean Strategy, a marketing theory focused on creating uncontested market space to gain a competitive advantage. It details the concept behind the strategy, its characteristics, and the importance of value innovation, which involves creating a leap in value for both buyers and the company. The report also explains the Four Action Framework (raise, eliminate, reduce, create) used to reconstruct buyer value elements and create a new value curve. It further discusses the principles of Blue Ocean Strategy and includes a case study of Bloomberg, a financial information provider, to illustrate the successful application of this strategy. The report emphasizes that by focusing on untapped markets and new demand, companies can achieve high growth and make the competition irrelevant, leading to overall cost reduction and increased value for the organization and its customers. Desklib offers a platform to explore such solved assignments and past papers.

Running Head: STRATEGIC MANAGEMENT 1
Strategic Management

Strategic Management 2
Executive Summary
The present report sheds light on the blue ocean strategy. The term, ‘blue ocean’ was first coined
in 2005, when the business researchers studied the successful business moves of over 150
business organizations. The blue ocean strategy refers to the strategic step, in which the
companies explore a new uncontested marketplace. The business organizations can explore
different strategic tools and frameworks, to identify the opportunity of unexplored marketplace.
There are several companies, which have used this strategy to identify new opportunities and tap
new customer base. In the present report, the case of Bloomberg, a financial information
provider has been taken. The company realized that the current financial information providers
focused on IT managers, the main purchasers rather than the investors and the trade analysts,
who are the real users of the system. It identified the business opportunity and designed their
system according to the end users. As a result, the company developed as one of the most
profitable information provider in a few years.

Strategic Management 3
Table of Contents
Executive Summary.........................................................................................................................2
Introduction......................................................................................................................................4
Blue Ocean Strategy........................................................................................................................4
Concept behind the Strategy........................................................................................................4
Characteristics of Blue Ocean Strategy.......................................................................................5
Value Innovation..........................................................................................................................6
Four Action Framework...............................................................................................................8
Principles of Blue Ocean Strategy.............................................................................................11
Analytical Tool..........................................................................................................................12
Case –Study...................................................................................................................................14
Introduction to the Business Organization.................................................................................14
Adoption of Blue Ocean Strategy..............................................................................................15
Summary........................................................................................................................................18
References......................................................................................................................................20

Strategic Management 4
Introduction
The strategic management is the process of managing the internal and the external resources of
the organization according to the goals and initiatives of the organization. It is the process of
providing direction to the business enterprise, with the specification of the organization’s
objectives, and developing policies and plans so that the organization can achieve its objectives.
The business managers develop different models and frameworks to support the strategic
business decision making of the organization. It involves strategic planning and strategic
thinking, which supports the decision making of the organization. In this regard, the present
report will analyze the key concept of blue ocean strategy for the business organizations. The
blue ocean strategy is the marketing theory, which is developed by analyzing the strategic moves
of the business organizations. The blue ocean strategy creates an uncontested market space,
which establishes a strong market for the organization. Further, the case of Bloomberg
publication has been taken to understand the application of blue ocean theory.
Blue Ocean Strategy
Concept behind the Strategy
The blue ocean strategy is a marketing theory, which states that the business organizations can
attain a competitive advantage by developing an uncontested marketspace. There are several
business organizations, which have utilized this strategy to establish a competitive advantage.
These strategic moves increase the value of the organization, by identifying new or unexplored
demand. It means that the organization makes the prior competition irrelevant.
The blue ocean strategy was introduced by W. Chan Kim and Renee Mauborgne in 2005 in their
best-selling book. The writers conducted research over 150 companies and their strategic moves

Strategic Management 5
to propose the strategy, which can create a new, uncontested market for the organization. The
book asserts that these strategic moves can enhance the value of the organization. The companies
can create success by creating “Blue Ocean” of uncontested marketplace, in contrast to the “red
ocean”, where different companies fight for dominance.
Characteristics of Blue Ocean Strategy
The blue ocean is defined by the untapped marketspace, novel demand and opportunity of high
growth. Several times, the companies create Blue Ocean beyond the existing industry
boundaries, which establish unexplored marketspace. Blue ocean strategy is used to new profit
and growth strategy. However, there is little research over the blue ocean strategy and it is
considered as a wishful thinking, which is too risky to pursue as a strategy. Therefore, most of
the business organizations focus on the red ocean strategy. The scholars have explored different
options such as cost leadership or product differentiation to lead in the red ocean market.
However, there is lack of focus on the blue ocean strategy. The business launch in both blue and
red can require investment; however, the performance benefits of the blue ocean strategy are
evident.
There are several forces, which motivates the companies to create blue ocean market for them.
There has been a substantial technological development, which has increased the industrial
productivity, and allowed the suppliers to product an array of objects and services. However, this
phenomenon is resulting in higher supply in comparison to the demand. There is a strong trend
towards the globalization, in which the trade barriers between the products and services have
reduced and the information regarding the product and the pricing is instantly and globally
available. With the advance in the knowledge, the monopoly has reduced and niche market has

Strategic Management 6
disappeared. The supply is increasing at a high rate in comparison to the demand, which might
be the result of the competition.
Therefore, it is important to develop a unique strategy for the red ocean market or to break out of
the competition of the red ocean. Although the development of blue ocean strategy is not
enough, it is important that right approach is taken for the implementation of the strategy. The
companies engrossed in the red ocean strategy follows a conventional approach, by beating the
competitors and creating a defensible position in the existing industry.
However, the creator of the blue ocean strategy does not analyze the competition as the
benchmark of to evaluate the market prospects. The followers of the blue ocean strategy follow
the concept of value innovation. It is termed as value innovation, as in this strategy, the
companies try to make the competition irrelevant by creating a leap in the value for the buyers
and the company. It creates a new, uncontested market for the companies.
Value Innovation
There are two main elements of the blue ocean strategy, namely, value and innovation. Without
innovation, value emphasize on creating value at an incremental scale, which can improve the
existing value; however, cannot create an exclusive place for the company in the market.
Similarly, innovation without establishing a value is driven by technology and it is futuristic
development. It means that the customers are not ready to accept it or pay a price for it.
Therefore, it is important to understand the difference between the technology innovation and
early market entry.
In the blue market strategy, the companies have to consider several factors along with the
innovation and market entry timings to become successful. The success in the marketplace can

Strategic Management 7
be achieved, when the companies align the business innovation with the utility, price, and the
cost position (Kuratko & Audretsch, 2009).
The value innovation is a novel thinking approach in which the company executes a strategy so
that it can achieve a break from the competition. This strategy results in the development of a
new market. Another characteristic of the value innovation is that it challenges the value-cost
trade-off of the companies. This theory states that either the companies can create a high value
for the customers by offering expensive products or it can create reasonable value products at a
low cost. This strategy relates to the strategies of cost leadership or product differentiation
(Lindič, Bavdaž & Kovačič, 2012).
The value innovation is a concept, in which the companies create a strategic market position for
itself, which is supported by the cost structure and value proposition of the organization. The
companies attain cost saving by eliminating and reducing the factors, which leads to the
industrial competition. The value to the buyers is increased as the company is creating and
offering the elements, which the company has never offered before. After a certain period of
time, the cost to the company is further reduced by reducing the scale of economy achieved due
to the high sales generated by the superior value.
Therefore, it means that the blue ocean is the strategy of reducing the overall cost to the
organization and simultaneously, driving the overall value to the organization. It is the process
through which the company can achieve a value for itself as well as for the buyers. The value for
the buyers is achieved from the utility and the price of the product. In the similar essence, the
value to the company is achieved by the pricing and the cost structure. The value innovation of
the company is achieved, when the system of the company aligns the product utility, price and

Strategic Management 8
the cost. Moreover, in order to create a sustainable value innovation, the companies have to
attain the support of the people, working for the organization. The value innovation requires the
alignment of the company’s utility, price, cost, and people. It requires holistic approach, in which
the companies try to develop a strategic innovation rather than an operational or functional
innovation.
On the other hand, the companies can also focus on creating a product innovation, without
impacting the overall strategy of the organization. It can be critiqued that innovation is a
production process and it can reinforce different benefits of the product without changing the
utility proposition of the product offering. These types of innovation can secure the position of
the organization in the market; however, it will not create the subsystem achieved through blue
ocean market.
It means that the value innovation is a unique concept as it focusses on the strategy, which
changes the system and operations of the organization. The value innovation requires that the
companies give an orientation to the whole business organization so that a value can be achieved
for the buyers as well as the employees.
Four Action Framework
There are four action frameworks, which are used to establish the blue ocean market for the
business organizations. It includes the following steps, namely, raise, eliminate, reduce and
create. In the raise phase, the companies raise questions regarding the demand in terms of
product, pricing and the service standard. The ‘eliminate’ is the phase in which the company
identifies the operational and the functional areas, which can be used to eliminate and reduce the
operational cost. The ‘reduce’ is the phase in which the company eliminate the operational
processes, which are not necessary for the operations of the organization. The ‘create’ is another

Strategic Management 9
strategy, which motivates the companies to be innovative about the products. It refers to the
ideas and factors, which can be used to generate values and new market for the organization. In
the ‘reduce’ phase, the companies reduce those factors, which have arisen as a consequence of
the competition. It rejects all the factors, which arise as a consequence from the competition
from different companies. In the ‘eliminate’ phase, the companies identify those factors, which
results in the industrial competition. In the ‘raise’ phase, the business organizations identify the
unique factors, which can raise the relative position of the organization in the industry. There are
two ways to establish blue market. In the first manner, the companies can launch a completely
new industry. However, finding a completely innovative company is challenging; therefore, most
of the companies create a blue ocean within the red ocean, in which the companies expand the
boundaries of an existing market (Kim & Mauborgne, 2004).
(Kim and Mauborgne, 2010)
The four action framework is another framework, which states that the organization can
reconstruct buyer value elements to create a new value curve. According to this framework, the
organization should answer to four strategic questions so that it can change the strategic logic

Strategic Management 10
and the business model of the organization. The company should identify which factors should it
eliminate, which are unnecessary for its sustenance. The company should also explore which
factors it can reduce below the industry standards. Other than that, the organization should also
explore those factors, which can provide competitive advantage to the organization, once the
company raises its standards above the industry standards (Johnson, Christensen & Kagermann,
2008). The value innovation is another concept in the industry innovation. The business
organizations should explore the innovation, which the industry has never offered before.
Figure: Four actions framework
(Source: Kim & Mauborgne, 2017a)
The first factor emphasizes that the organization should try to eliminate or reduce the factors,
which are considered crucial competitive advantages for the industry. Several times, the
companies focus on the competitive factors, even when they are not generating any value. The
organizations are unable to comprehend the fundamental changes in consumer perceived value.

Strategic Management 11
However, the company emphasizes benchmarking one another rather than understanding the
change.
The second factor is the evaluation regarding the services offered to the customers. The
companies should determine whether the products or services have been overdesigned to combat
the competition. The companies exceed the expectations of the customers; however, these
initiative increases the cost structure of the organization. However, it does not increase the
profitability of the organization. The third factor states that it is important to identify the
customer compromises in the industry. These findings can be used for designing novel
innovations. In the fourth factor, the companies can identify new demands so that the
organization can make new changes in the industry (Yang and Yang, 2011).
Principles of Blue Ocean Strategy
The blue ocean strategy is based on six principles, which guides the companies in developing the
blue ocean strategy, while minimizing the risk and increasing the opportunity. The first principle
of the blue ocean strategy is the reconstruction of the market boundaries, which states that the
business organizations should identify the paths, through which they can create the uncontested
market in different industry domains. It states that the companies should explore new options so
that the existing competition becomes irrelevant. The companies should explore alternative
industries, different strategic groups, complementary product and services to change the
functional and emotional orientation of the industry. The second principle is the design process
of the strategic planning process so that incremental improvements can be conducted on the
value innovation. It is an alternative to the strategic planning process. This principle is based on
the risk management in the business environment. It is a visualization approach, which can
motivate the business managers to implement a planning process to capture the blue ocean

Strategic Management 12
opportunities. The third principle of the framework is to create a high opportunity market for
new demands. In the blue ocean strategies, the companies or the business managers to aim for
developing a new consumer segment rather than aiming for a finer consumer segment, in which
the organization can meet the customer segments. It results in development of small consumer
segments.
However, this principle shows aggregation of demand by building powerful commonalities
between different consumers. The fourth principle of the blue ocean strategy framework is
obtaining right strategic sequence for the organization. According to this principle, the business
organizations should follow a strategic sequence to create a profitable business model. The
companies have to follow a strategic sequence of utility, price and cost requirements. The fifth
principle in the blue ocean strategy is overcoming the challenges in the organization. The
business managers of the organization should focus on removing all the hurdles, which can
impact on the implementation of the blue ocean strategy. The business managers can address the
cognitive, resource and motivational hurdles so that the implementation of blue ocean strategy
can be carried out smoothly. The sixth principle of the blue ocean framework is developing a
framework for the implementation of the strategy. When the execution is integrated to the
strategy of the organization, people are motivated to execute the changes within the organization
(Kim, Yang and Kim, 2008). The execution strategy should focus on mobilizing the organization
so that the people cooperate to execute the blue ocean strategy.
Analytical Tool
There are several set of analytical tools and frameworks, which can be used to forming and
executing the blue ocean strategy in the organization. The strategy canvas is the most compelling
tool to build the blue ocean strategy. This tool allows the customers to evaluate the current

Strategic Management 13
competition in the marketplace (Kim & Mauborgne, 2017b). The nosiness organization can
analyze where the competitive environment is investing, the major factors in the competition,
and the competitive offerings of the customers.
The companies can shift the strategy canvas of the industry by reorienting the strategic direction
of the organization from the competitors to the customers of the industry. The blue ocean
strategy is essential in pursuing value and low cost objectives. Therefore, instead of
benchmarking the competitors, the organization should choose between differentiation and cost
leadership (Agnihotri, 2016). When the organization shifts its focus on the current competition to
different alternatives, it assists the organization in understanding the key issues of the industry
and reconstructing the buyer value within the industry boundaries. The strategic reasoning will
help the organization in providing better solutions to the rivals.
After the identification of the strategy, the companies should focus to reconstruct the market
boundaries so that new market can be created for combating the competition. There are a large
number of opportunities; however, the most important challenge is to identify the commercially
compelling opportunity. There are some specific steps, required to create blue ocean markets.
These approaches can assist the company in creating commercially viable blue ocean ideas. In
order to break from the blue ocean industry, the companies have to analyze the blue ocean
systematically (Agnihotri, 2016). It is important that the company explore alternative strategies,
different buyer groups, complementary product and offerings and the functional-emotional
orientation of the employees. It gives companies insight so that it can recreate the market
boundaries.

Strategic Management 14
Case –Study
Introduction to the Business Organization
In order to understand the importance of blue ocean strategy in the current competitive market,
the case-study of Bloomberg is taken. It is a private information provider, which encompasses
the financial data of different companies. It has various sub-branches such as financial software,
data and Media Company and the headquarters of the company are in New York City. The
company also provides different financial software tools such as analytics and equity trading
platform, data services and financial news to the business organizations and companies. The
primary revenue source of the organization is Bloomberg Terminal through which the company
provides analytical information regarding the equity trading and financial knowledge. The
organization also has different autonomous bodies such as newsletters, digital websites and
magazines. The company has adopted a unique organization culture wherein the offices have
non-hierarchal structures. All the employees have identical desk and a custom-made computer
terminal.
The company was founded in 1981 and within a short span of time, become the largest financial
information provider in the USA. It has created a unique selling proposition by providing
financial information in an easy manner to the customers. The company challenged the
traditional business model and created a new market by targeting customers in the financial
industry. Before Bloomberg’s arrival, the big names in the financial service providers was
Reuters, Dow Jones and Telerate. There companies provided news and price in real time to the
financial investors and the brokerage community. However, these companies focused on their
major customers, IT managers, who wanted a standardized system (Randall, 2015).

Strategic Management 15
However, the company realized that the end-users of the system are having difficulty in handling
the system the end-users of the system are traders and analysts, who invest money for their
clients. The company identified that there is disparity in information, which can be used to make
a novel business model. The company realized that in active market, the traders have to make
rapid decisions as every second is important for the profitability (Ghura & Hattangadi, 2012).
Adoption of Blue Ocean Strategy
The company looked across the chain of buyers to analyze the potential market. In most of the
industrial sectors, the companies look for the target buyers of industry. However, in real life
situations, there is a chain of buyers and the company has to identify the people who are directly
or indirectly involved in the decision making process. Several companies have realized that the
purchasers paying for the product or service can be different from the actual users; therefore,
they can be considered as important influencers. The users, influencers and the purchasers can
overlap; however, most of the times they differ. However, when these sections are different, they
consider different value of the object (Kim & Mauborgne, 2017). As a result, different
companies in the same industry target different consumer segments; however, later an industry
converges to a single customer group. This convergence is dependent on the profitability of the
organization.
The business organizations can target the conventional wisdom of the companies to discover a
new blue ocean. The companies can identify different buyer groups so that it can achieve new
insight for customizing the product. The companies can redesign their values so that it can novel
solutions for the overlooked buyers (Kim & Mauborgne, 2017).

Strategic Management 16
Therefore, Bloomberg designed a financial software system in which the traders are provided a
leap in value. The company designed easy-to-use terminals and the keyboards have familiar
financial terms. The systems have flat-panel monitors and analytical capabilities in the system.
With the emphasis on the users, the company was capable of designing a blue ocean with high
profitability. The company shifted its emphasis on the work-life balance of the traders and the
analysts. With this analysis, the company was able to understand the paradox in the lives of the
analysts wherein they have high income; however, little time to spend with their customers. With
the focus on the customers, the company created a market of high potential growth. The
company added information regarding the purchase services as the leaders have little time to
analyze the purchase services. The systems used by the traders also have two flat panel monitors
so that the traders can access all the information without having to note down the important
values. Prior to this arrangement, the traders had to note down the data using a pen and make all
the financial projections and calculations manually. The users also have several options to
choose from, while making the financial decisions. They can analyze the alternative investments
and the users can also make the longitudinal analysis of the historic data.
The company also realized that the organization has realized that the financial markets have slow
time during the noon, when the organization trading takes place. The company also added the
details of various purchasing services to the software of the organization. The traders can use this
information to buy different items such as flowers, clothing, traveling or real estate listing.
Therefore, it can be stated that the organization created a blue ocean market by focusing on the
users rather than the purchasers (Kim and Mauborgne, 2014).

Strategic Management 17
The company shifted its focus upstream from the purchasers to the users and created a value
curve for the customers, which was substantially different from other industries. The business
traders and the market analysts used their position and power to force the IT managers to
purchase Bloomberg terminals.
Figure: Bloomberg Value Curve
(Source: Kim & Mauborgne, 2017b)
The blue ocean refers to depth and transparency, which shows the depth and strength of the
market in the organization. The business organizations should realize that there is special
environment and they should respond to the changes to the market.
There are several advantages of the blue ocean market. In the present, there is a very high level
of competition among the business organizations in a single industry. With the high level of
competition, the business organization responds to the increased competition in a different
manner. The business organizations adapt their behavior based on the external influence and the

Strategic Management 18
behavior of the competitors. It is the red ocean manner of organization strategy, in which the
business organizations focus on the current market competitions. It results in a win-lose situation
and the business organizations believe that the best organization can win the competition
(Helinski, 2014).
Most of the business organizations operate in this manner; however, it can never ensure long-
term competitive advantage or success. Excessive competition also results in wastage and
consumption of excessive resources. In such situation, blue ocean strategy is the systematic
approach to in which the firms focus on competitive strategies, which makes other competition
in the market irrelevant. It creates an uncontested market space. By exploring different avenues
in the industry, the companies can gain new insight to redesign the customer value to explore
new target customers. In this strategy, the companies do not benchmark the competition and tries
to focus on value innovation. It creates a leap in the value of the customers and the buyers, which
results in uncontested marketplace. In the blue ocean strategy, the companies add value to the
innovation and the companies increases the value of the product in terms of utility, price or cost
(George, 2018).
Summary
Strategic management refers to the process in which the organization determines its strategic
operations according to the goals and objectives of the organization. The strategic management is
the continuous process in which the goals and objectives of the organizations constantly changes
and the organization devise strategy to achieve them. The strategy formation is a key concept of
business management as the organization achieves its goals through following a specific set of
actions. It analyzes current set of opportunities for the business organization. In this regard, the

Strategic Management 19
present report has evaluated the blue ocean strategy of strategic management. The blue ocean
strategy was a term coined by the global management thinkers, W. Chan Kim and Renée
Mauborgne. They studied the strategic moves of the 150 companies across 30 industries in the
companies. The blue ocean strategy was based on creating untapped market for the growth.
The blue ocean strategy is based on two factors, value and innovation. In the absence of
innovation, value is enhanced at an incremental scale. It can improve the current value, but it
cannot create a niche marketplace for the customers. In the same essence, innovation enhances
the value by creating a leap in the value of the product offering.
There are several frameworks to identify blue ocean strategy scope in the market. The four action
framework states that the organization can reconstruct value so that it makes the competition
irrelevant. The company should identify which factors which can provide competitive advantage
to the organization. Once the company identifies them, it raises standards above the industry
standards.

Strategic Management 20
References
Agnihotri, A. 2016. Extending boundaries of blue ocean strategy. Journal of Strategic
Marketing, 24(6), 519-528.
George, S. (2018). Redesign the value curve. Malaysian Reserve. [Online]. Available at:
https://themalaysianreserve.com/2018/03/12/redesign-the-value-curve/ [Accessed on: 10 April
2018].
Ghura, A. S., & Hattangadi, V. (2012). BLUE OCEAN STRATEGY. Sansmaran Research
Journal, 2(1), 45-46.
Helinski, C. (2014). The Application of the Blue Ocean Strategy Assessing Opportunities for
Stationary Fashion Retail Companies Targeting Competitive Advantages. GRIN Verlag.
Johnson, M. W., Christensen, C. M., & Kagermann, H. 2008. Reinventing your business
model. Harvard business review, 86(12), 57-68.
Kim, C., Yang, K.H. and Kim, J., 2008. A strategy for third-party logistics systems: A case
analysis using the blue ocean strategy. Omega, 36(4), pp.522-534.
Kim, W.C. and Mauborgne, R.A., 2014. Blue ocean strategy, expanded edition: How to create
uncontested market space and make the competition irrelevant. Harvard business review Press.
Kim, W.C., & Mauborgne, R. (2010). Blue Ocean Strategy: Application In Universiti Sains
Malaysia Library. Research Gate. [Online]. Available at:

Strategic Management 21
https://www.researchgate.net/figure/The-four-actions-framework-of-Blue-Ocean-strategy-Kim-
and-Mauborgne-2010_fig3_258499331 [Accessed on: 10 April 2018].
Kim, W.C., & Mauborgne, R.A. (2017). Blue Ocean Strategy with Harvard Business Review
Classic Article “Red Ocean Traps” (2 Books). Harvard Business Press.
Kim, W.C., & Mauborgne, R.A. (2017a). Blue Ocean Strategy with Harvard Business Review
Classic Articles “Blue Ocean Leadership” and “Red Ocean Traps” (3 Books). Harvard Business
Press.
Kim, W.C., & Mauborgne, R.A. (2017a). Red Ocean Traps (Harvard Business Review Classics).
Harvard Business Review Press.
Kim, W.C., & Mauborgne, R.A. (2017b). Blue Ocean Leadership (Harvard Business Review
Classics). Harvard Business Review Press.
Kim, W.C., & Mauborgne, R.A. (2017b). The W. Chan Kim and Renée Mauborgne Blue Ocean
Strategy Reader: The iconic articles by bestselling authors W. Chan Kim and Renée Mauborgne.
Harvard Business Review Press.
Kuratko, D. F., & Audretsch, D. B. (2009). Strategic entrepreneurship: exploring different
perspectives of an emerging concept. Entrepreneurship Theory and Practice, 33(1), 1-17.
Lindič, J., Bavdaž, M., & Kovačič, H. 2012. Higher growth through the Blue Ocean Strategy:
Implications for economic policy. Research policy, 41(5), 928-938.
Randall, R. M. 2015. W. Chan Kim and Renée Mauborgne dispel blue ocean myths. Strategy &
Leadership, 43(2), 11-14.

Strategic Management 22
Yang, C.C. and Yang, K.J., 2011. An integrated model of value creation based on the refined
Kano's model and the blue ocean strategy. Total Quality Management & Business
Excellence, 22(9), pp.925-940.
Zhexembayeva, N. (2014). Overfished Ocean Strategy: Powering Up Innovation for a Resource-
Deprived World. Berrett-Koehler Publishers.