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  • In 1984, Guy Laliberté co-founded Cirque du Soleil.

  • Soon, Cirque was bringing in revenues

  • that incumbents, like Ringling Brothers,

  • had taken more than a century to attain,

  • even though the circus business was in long term decline.

  • How did Cirque thrive in such a dismal environment?

  • The answer can be found in the theory that the business

  • universe consists of two kinds of markets,

  • red oceans and blue oceans, a concept pioneered by inset

  • professors, W Chan Kim and Renée Mauborgne.

  • Red oceans represent existing industries and markets

  • where industry boundaries and the rules of competition

  • are well-defined.

  • Companies strive to outperform rivals and grab a bigger

  • share of existing demand.

  • As the space gets crowded, fierce competition

  • turns the water bloody.

  • Competitive or market competing strategy it's

  • about how to occupy red oceans.

  • By contrast, blue ocean, or market creating strategy,

  • is about how to create and capture unknown markets where

  • demand is created rather than fought over.

  • In some cases, this spawns entirely new industries,

  • but most blue oceans emerge when a company alters the boundaries

  • of an existing industry, as when Cirque du Soleil blurred

  • the line between circus and theater.

  • Cirque made the acts more artistic and sophisticated,

  • attracting a whole new group of customers, adults

  • who are prepared to pay premium ticket prices that they would

  • for the theater or the opera.

  • Cirque also eliminated several elements

  • of the traditional circus, like costly animal acts and star

  • performers.

  • Cirque invented a new and profitable market space

  • without making the typical trade off between value and cost.

  • Cirque pursued both differentiation and low cost

  • in what Kim and Mauborgne called value innovation.

  • The simultaneous pursuit of value and cost

  • is the logic of Blue Ocean strategy.

  • Based on their study of more than 30 industries,

  • companies that can create blue oceans

  • usually reap the benefits for 10 to 15 years

  • because they are hard for rivals to copy.

  • To realize blue ocean potential, like Cirque did,

  • companies should chart a strategic course

  • past traditional industry boundaries

  • to create new market space.

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The Explainer: Blue Ocean Strategy

  • 69 3
    jbsatvtac1 posted on 2019/08/16
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