Blue Ocean Strategy and ITC

Blue Ocean Strategy is the latest buzzword in business strategy today. If you haven''t heard of it, here's a quick video which will illustrate the gist of it : 

An Indian company which has adopted this strategy is ITC, by means of its eChoupal initiative.ITC Agro's CEO S Sivakumar recently gave a presentation about the same ( which can be found here ).

The traditional way of working in rural India was to follow the red ocean strategy.  Companies featured stripped products at low prices, or single serve packs at unit prices, while targeting rural consumers in India. These efforts did succeed to some extent, but growth & profitability were limited, because everyone was competing for a larger share of the same small wallet. The outcome was a bloody red ocean! 

Then came along ITC eChoupal, and said "why not raise the incomes of rural people and then get a larger share of their expanding wallets?" "And if we can raise their incomes profitably, that becomes a unique business opportunity in itself, and will also create a virtuous cycle; more profits to ITC --> higher incomes to rural producers --> more spends by the rural consumers --> more profits to ITC -->" In other words, fortune "for" the bottom of the pyramid as a route to discover fortune "at" the bottom of the pyramid!

Thus, instead of following the conventional logic of outpacing the competition on the same counts by offering a better solution (lower prices) to the given problem (low incomes), ITC eChoupal redefined the problem itself and offered a blue ocean solution that made the competition irrelevant. This 'reconstructed' the market boundaries and eliminated the 'search risk'.

BOS recommends a sequence in which the strategy must be created to ensure a win-win in the new market terrain, viz. 'utility' of the offering to the customer, 'price' that is relevant to the customer, a target 'cost' that leaves sufficient profit for the company at the relevant price, and finally make certain that the customer 'adopts' the offering... In fact, ITC eChoupal can be called a "deep blue ocean strategy" because this sequence itself was made redundant by "raising incomes, at no charge to the customer; the questions on pricing and adoption didn't even arise"!