Michael E. Porter’s Generic Strategies imply a value-cost trade-off according to which companies can either create greater value to customer at a higher cost, or create reasonable value at a lower cost. However, another strategy pursuing both differentiation and low cost simultaneously exists: the Blue Ocean Strategy. Developed by W. Chan Kim and Renée Mauborgne; the Blue Ocean Strategy contrasts with the red ocean metaphor. The idea is that a company doesn’t compete anymore to get a bigger market share than the other competing sharks in the bloodied existing market space but creates a new market to swim in a new blue ocean.

The success of the Cirque du Soleil is a good example of the Blue Ocean Strategy. Since they were the first ones with shows combining street performers, acrobats and gymnasts in intercultural theater and dance dramas, they reconstructed the market’s boundaries. They created an uncontested market space and made competition irrelevant. Consequently, they created and captured a new demand. Furthermore, they did not behave monopolistically and priced their “product” strategically to win a massive public resulting in a win-win situation for the spectators (value proposition), for the Cirque (profit proposition) and for the artists (people proposition). Their strategy is illustrated in the following strategy canvas:If attending a show remains expensive (≈ $100 for the show ‘O’), it is because of the focus put on creativity. No lack of means should impair the performance of the artists. For instance, to set the Bellagio Hotel built for ‘O’ in Las Vegas was $75 million. Such costs justify the pricing of the tickets. The artists’ needs must be satisfied for the Cirque to ensure its success, the viability of its business model and, of course, the stars shining in the eyes of its amazed spectators.

Sources:
– www.blueoceanstrategy.com
– www.sixpathsconsulting.com/blue_ocean_strategy.htm