What is Blue Ocean Strategy?
Blue Ocean Strategy, by Kim and Mauborgne (2005), argues that the most profitable growth comes not from competing in existing markets ("red oceans" bloodied by competition) but from creating uncontested market space ("blue oceans"). The mechanism is value innovation — simultaneously increasing customer value and reducing cost by changing the basis of competition. The Four Actions Framework asks: which industry factors should be eliminated, reduced, raised, or created? The Strategy Canvas plots the firm's value curve against rivals'. A successful blue ocean strategy makes competition irrelevant by appealing to non-customers of the existing category.
How Blue Ocean Strategy actually works
The framework breaks down into the following moving parts. Knowing what each piece is — and what it is not — is what separates a B-grade answer from an A-grade answer in a written assignment.
- Eliminate — which factors taken for granted should be removed?
- Reduce — which factors should be reduced well below industry standard?
- Raise — which should be raised well above standard?
- Create — which factors never offered should be introduced?
- Strategy Canvas — visualize the value curve
- Target non-customers of existing market
A worked example: Cirque du Soleil
Cirque du Soleil is the canonical blue ocean case. Traditional circus competed on animal acts, star performers, and three-ring chaos — declining demand, shrinking profits. Cirque eliminated animal acts and star performers, reduced humor and danger, raised theatre and refinement, and created theme, music, and venue elegance. The new value curve appealed to a non-customer (theatre-going adults) at a price point closer to Broadway than circus. Cirque was profitable from year three, scaled to $1B+ revenue, and operated unrivaled for two decades — the textbook example of value innovation.
Don't lose marks for these
- Treating Blue Ocean as an extension of existing strategy
- Skipping the Eliminate-Reduce step (cost reduction is half the value innovation)
- Believing all blue oceans are sustainable — they eventually become red
How to use this on the exam
Score-maximizing moves
- Use the Four Actions Framework explicitly
- Draw the Strategy Canvas
- Cite Kim & Mauborgne 2005
When to use Blue Ocean Strategy (and when not to)
Use Blue Ocean Strategy when your assignment asks you to analyze, structure, or recommend — and when you have at least two data points to populate every cell of the framework. Skip it when the question is asking for a numerical answer or a single recommendation, since Blue Ocean Strategy is a structuring tool, not a calculator.