Blue Ocean Strategy

Imagine a market universe composed of two sorts of oceans:

The red ocean represents all the industries in existence today – this is the known market space.

The blue ocean denotes all the industries not in existence today – this is the unknown market space.
 

Blue oceans

Blue oceans cab be created two ways

1) Totally beyond existing industries e.g. aviation

2) Most are created by expanding existing boundaries – which is why it is a marketing tool

 The first principle of blue ocean strategy is to reconstruct market boundaries to break from the competition.

Red oceans

Red oceans will always matter and will always be a fact of business life. But with supply exceeding demand in more industries, competing for a share of contracting markets, while necessary, will not be sufficient to sustain high performance. Companies need to go beyond competing. To seize new profit and growth opportunities, they also need to create blue oceans.

Value innovation

The creators of blue oceans, surprisingly, didn’t use the competition as their benchmark. Instead, they followed a different strategic logic that we call value innovation. Value innovation is the cornerstone of blue ocean strategy. We call it value innovation because instead of focusing on beating the competition, you focus on making the competition irrelevant by creating a leap in value for buyers and your company, thereby opening up new and uncontested market space.

Air Asia - Value Innovation

Air Asia have managed to avoid the red ocean (compete with Malaysia Airline and regional airline such as Tiger Air, Jet Air etc.) by looking into the factors that industry take for granted and also factors that important to customers. With the Four Actions Framework proposed by Blue Ocean Strategy authors, Air Asia have implemented many strategic moves to ensure they are making Malaysia Airline and regional airline company irrelevant.

Example of the strategic move as follows:

Eliminate:

* Over the counter booking system

* Free Food/Beverage on the plane

* Seating Class booking system

Reduce:

* "luxury" facilities provided by Airport Lounge

* No of attendance service on the plane

* Seat Quality

Rise:

* Focus on several key destinations

* Increase frequency of flight

Create:

* Online Booking system

* Point to point travel system

With this strategic move, Air Asia able to focus on factors that really bring value to the customers such as point to point travel system, easy booking system etc. This will help Air Asia to reduce cost and at the same time increase the value to the customers - Value Innovation.

 

Reference:

http://sm.avito.nl/wp-content/uploads/2013/02/Chan-Kim-W.-R.-Mauborgne-2005-Blue-ocean-strategy-USA-Boston-Harvard-Business-School.pdf

http://ezinearticles.com/?Blue-Ocean-Strategy-Example-in-Asia---Example-1&id=1031603

http://www.blueoceanstrategyaustralia.com.au/what-is-bos/red-vs-blue/

http://txmqstaffing.com/fishing-in-a-blue-ocean/