How did Tesla create a blue ocean market in the automotive industry? How did IKEA create a blue ocean market in the furniture industry? What is a blue ocean strategy? What is the ERRC Grid for Blue Ocean Strategy?

This blog has the answers to these questions. This is blog#10 in the series of blogs on Strategic Frameworks.

ERRC Grid is a framework created by W. Chan Kim and Renée Mauborgne, professors at INSEAD. They explained this framework in their book Blue Ocean Strategy published in 2005.

Red Ocean Strategy V/S Blue Ocean Strategy

The Red Ocean strategy involves competing in existing markets and vying for market share with established rivals. Cut-throat competition in this market often leads to price wars and diminishing profits.

EXAMPLES-

(i) Personal Care FMCG: Companies like HUL (Hindustan Unilever Limited), P&G (Procter & Gamble), Dabur India, Godrej Consumer Products, Emami Ltd, Patanjali Ayurved compete for markets of hair-care, skin-care, and oral care with competitive pricing, provide offers, and discounts.

(ii) Food Retail:

In-Store: Reliance Fresh, D-Mart, Big Bazaar, Tata Star Bazaar, More Retail, Spencer, local grocery shops, etc.

Online- Amazon Fresh, Flipkart, Big Basket, BlinkIt, etc.

In contrast, the Blue Ocean strategy is to create a new market space with little or no competition. By offering unique value proposition and breaking away from industry norms, companies pursuing Blue Ocean strategies can achieve sustainable growth and differentiation.

EXAMPLES-

(i) EV Market: Tesla created the blue ocean market for electric vehicles. Now, the EV market is turning into a red ocean market with many competitors entering the market.

(ii) DIY (Do-It-Yourselves) Furniture: Instead of competing directly with traditional furniture retailers, IKEA created a new market space by offering a unique value proposition: affordable, stylish, and functional furniture that customers assemble themselves.

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ERRC Grid

The ERRC Grid is a strategic tool used to create innovative business models and products by focusing on four key areas

  1. Eliminate- Identify factors that the industry takes for granted and eliminate them. This reduces costs and streamlines operations.
  2. Reduce- Identify factors that can be reduced below the industry standard. This can help lower costs and improve efficiency.
  3. Raise- Identify factors that can be raised above the industry standard. This can enhance the value proposition and differentiate your offering.
  4. Create- Identify factors that can be created that the industry has never offered. This can open up new markets and create new demand.
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CASE STUDIES

CASE#1 TESLA

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CASE#2 IKEA

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CONCLUSION

The ERRC Grid is a strategic tool that empowers businesses to create a blue ocean strategy. The framework helps companies break away from traditional industry norms and create innovative, sustainable value propositions. By eliminating non-value-adding activities, reducing unnecessary costs, raising key performance indicators, and creating new offerings, companies can differentiate themselves, capture new market space, and achieve competitive advantage.

PS,

Links to my previous blogs in the series of blogs on strategic frameworks are below

  1. Blog#1- Introduction Click Here
  2. Blog#2- Porter's 5 Forces Click Here
  3. Blog#3- PESTEL Analysis Click Here
  4. Blog#4- SWOT Analysis Click Here
  5. Blog#5- Business Model Canvas Click Here
  6. Blog#6- ANSOFF Matrix Click Here
  7. Blog#7- BCG Matrix Click Here
  8. Blog#8- McKinsey's 7S Framework Click Here
  9. Blog#9- OKR & KPI Click Here