Blue Ocean Strategy is based on the idea of finding and creating uncontested market space, where a business can deliver unique value without competition. Thus, the goal is to create and capture new demand, rather than trying to compete in existing markets where competition is already fierce. Recent history has shown that companies that have managed to apply the Blue Ocean Strategy successfully have thrived.
Competing with existing companies in a market that is already saturated is hard. Such an environment often leads to fierce competition and price wars, as companies try to gain market share by offering lower prices or similar products/services. When companies fight over a limited pool of customers the market becomes a “bloody” battlefield for survival. In the book “Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant” W. Chan Kim and Renée Mauborgne popularized the term “red ocean strategy” to describe a situation in which companies compete in an already crowded market.
In contrast, a “blue ocean strategy” involves creating new markets or market segments that are not currently being served, through innovation and differentiation, rather than competing with existing companies. This often leads to less competition, higher profits, and greater market share. Thus, the goal of a blue ocean strategy is to create a market space that is uncontested, hence the name “blue ocean.”
The Main Idea
Blue Ocean Strategy is based on the idea that businesses can succeed by creating new market space and making competition irrelevant, rather than trying to compete in existing markets. This is achieved by focusing on creating unique value for customers, rather than simply trying to outperform competitors.
One of the key principles of Blue Ocean Strategy is to look beyond existing market boundaries and find new ways to create value for customers. This can involve offering new products or services, targeting new customer segments, or finding new ways to deliver value.
The goal of Blue Ocean Strategy is to create a “blue ocean” of uncontested market space, where a business can thrive and grow without competition. By focusing on creating unique value and avoiding direct competition, businesses can avoid the cut-throat competition of existing markets and create new demand for their products and services.
Blue Ocean Strategy is a holistic approach to business strategy that involves examining every aspect of a company’s operations, from its products and services to its pricing, distribution, and marketing. By looking at all of these factors together, businesses can develop a comprehensive strategy for creating and capturing new demand.
Strategies Involved
Blue Ocean Strategy is a valuable approach for businesses looking to differentiate themselves and find new ways to create value for their customers. By focusing on creating unique value and avoiding direct competition, businesses can avoid the challenges of existing markets and create new opportunities for growth and success.
This can be achieved through a number of different strategies, including:
- Value innovation: This involves offering unique value to customers through a combination of low cost and differentiation. By offering value that is both high and unique, businesses can create new demand and make competition irrelevant.
- Eliminating and reducing: This involves identifying and removing the factors that are driving up costs and creating little value for customers. By eliminating or reducing these factors, businesses can create new value for customers and reduce costs at the same time.
- Raising and creating: This involves identifying and adding new factors that will create value for customers. By raising and creating these factors, businesses can create new value for customers and differentiate themselves from competitors.
- Reconstruct market boundaries: This involves looking beyond existing market boundaries and finding new ways to create value for customers. By reconstructing market boundaries, businesses can create new market space and make competition irrelevant.
Blue Ocean Strategy involves a combination of these strategies, with the goal of creating unique value for customers and avoiding direct competition with other businesses.
The Principles of Blue Ocean Strategy
The principles of Blue Ocean Strategy are the key ideas and concepts that form the basis of this approach to business strategy. These principles include:
- Value innovation: This involves offering unique value to customers through a combination of low cost and differentiation. By offering value that is both high and unique, businesses can create new demand and make competition irrelevant.
- Focus on creating new market space: Blue Ocean Strategy is based on the idea of creating new market space, rather than competing in existing markets. By focusing on creating new market space, businesses can avoid the challenges of intense competition and find new ways to create value for customers.
- Make competition irrelevant: The goal of Blue Ocean Strategy is to make competition irrelevant, rather than trying to outperform competitors. By creating unique value and avoiding direct competition, businesses can create new demand and succeed without competing in existing markets.
- Create unique value for customers: The key to success with Blue Ocean Strategy is to create unique value for customers. By offering value that is both high and unique, businesses can create new demand and differentiate themselves from competitors.
- Look beyond existing market boundaries: Blue Ocean Strategy involves looking beyond existing market boundaries and finding new ways to create value for customers. By reconstructing market boundaries, businesses can create new market space and make competition irrelevant.
These principles form the core of Blue Ocean Strategy and provide a framework for businesses to create unique value for customers and succeed in today’s competitive business environment.
The Elements of Blue Ocean Strategy
The elements of Blue Ocean Strategy are the key components that make up this approach to business strategy. These elements include:
- Six Paths Framework: This is a framework that helps businesses identify new market space and create unique value for customers. The six paths include: (1) looking across alternative industries, (2) looking across strategic groups within an industry, (3) looking across the chain of buyers, (4) looking across complementary product and service offerings, (5) looking across functional or emotional appeal to buyers, and (6) looking across time.
- Value Curve: This is a tool that helps businesses plot their offering against the competition in terms of both cost and value. By comparing their offering to the competition, businesses can identify areas where they can create unique value for customers and avoid direct competition.
- Four Actions Framework: This is a framework that helps businesses eliminate and reduce factors that are driving up costs and creating little value for customers, and raise and create new factors that will create value for customers. By using the Four Actions Framework, businesses can create unique value for customers and differentiate themselves from competitors.
- Three Tiers of Noncustomers: This is a framework that helps businesses identify groups of noncustomers and create new market space by targeting these groups. The three tiers of noncustomers include: (1) those who have never been customers, (2) those who have stopped being customers, and (3) those who choose not to be customers.
Successful Applications of Blue Ocean Strategy
Blue Ocean Strategy has been used by a number of businesses to create new market space and make competition irrelevant. Some examples of the use of Blue Ocean Strategy include:
Cirque du Soleil: This is a world-renowned entertainment company that was founded in 1984. Using Blue Ocean Strategy, Cirque du Soleil was able to create a new market space for live entertainment by combining the elements of a traditional circus with new forms of art, such as theater, dance, and acrobatics. By offering unique value and avoiding direct competition with traditional circuses, Cirque du Soleil was able to create new demand and become one of the most successful entertainment companies in the world.
GoPro: This is a technology company that was founded in 2002. Using Blue Ocean Strategy, GoPro was able to create a new market space for portable, high-definition cameras by combining the features of a traditional camcorder with the durability and versatility of a digital camera. By offering unique value and avoiding direct competition with traditional camcorders, GoPro was able to create new demand and become one of the most successful camera companies in the world.
Zara: This is a clothing company that was founded in 1975. Using Blue Ocean Strategy, Zara was able to create a new market space for fast fashion by offering trendy, affordable clothing that is updated weekly. By offering unique value and avoiding direct competition with traditional clothing retailers, Zara was able to create new demand and become one of the most successful clothing companies in the world.
Airbnb: This is a hospitality company that was founded in 2008. Using Blue Ocean Strategy, Airbnb was able to create a new market space for short-term rentals by connecting people who have space to rent with people who are looking for a place to stay. By offering unique value and avoiding direct competition with traditional hotels, Airbnb was able to create new demand and become one of the most successful hospitality companies in the world.
Southwest Airlines: This is an airline company that was founded in 1967. Using Blue Ocean Strategy, Southwest was able to create a new market space for budget air travel by offering low-cost, no-frills flights. By offering unique value and avoiding direct competition with traditional airlines, Southwest was able to create new demand and become one of the most successful airlines in the world.
Netflix: This is a media company that was founded in 1997. Using Blue Ocean Strategy, Netflix was able to create a new market space for on-demand video streaming by offering a wide selection of movies and TV shows that can be watched anytime, anywhere. By offering unique value and avoiding direct competition with traditional cable and satellite TV providers, Netflix was able to create new demand and become one of the most successful media companies in the world.
IKEA: This is a furniture company that was founded in 1943. Using Blue Ocean Strategy, IKEA was able to create a new market space for affordable, modern furniture by offering stylish, functional products at low prices. By offering unique value and avoiding direct competition with traditional furniture retailers, IKEA was able to create new demand and become one of the most successful furniture companies in the world.
TOMS Shoes: This is a footwear company that was founded in 2006. Using Blue Ocean Strategy, TOMS was able to create a new market space for socially-conscious fashion by offering stylish shoes that are also affordable and comfortable. By offering unique value and avoiding direct competition with traditional footwear companies, TOMS was able to create new demand and become one of the most successful shoe companies in the world.
Starbucks: This is a coffee company that was founded in 1971. Using Blue Ocean Strategy, Starbucks was able to create a new market space for specialty coffee by offering high-quality, gourmet coffee that is both affordable and accessible. By offering unique value and avoiding direct competition with traditional coffee shops, Starbucks was able to create new demand and become one of the most successful coffee companies in the world.
Amazon: This is an e-commerce company that was founded in 1994. Using Blue Ocean Strategy, Amazon was able to create a new market space for online shopping by offering a wide selection of products at low prices, with fast and convenient delivery. By offering unique value and avoiding direct competition with traditional brick-and-mortar retailers, Amazon was able to create new demand and become one of the most successful e-commerce companies in the world.
Tesla: This is an automotive company that was founded in 2003. Using Blue Ocean Strategy, Tesla was able to create a new market space for electric vehicles by offering high-performance cars that are also environmentally-friendly and affordable. By offering unique value and avoiding direct competition with traditional car manufacturers, Tesla was able to create new demand and become one of the most successful automotive companies in the world.
Skype: This is a telecommunications company that was founded in 2003. Using Blue Ocean Strategy, Skype was able to create a new market space for internet-based communication by offering free, high-quality voice and video calls over the internet. By offering unique value and avoiding direct competition with traditional phone companies, Skype was able to create new demand and become one of the most successful telecommunications companies in the world.
Dropbox: This is a technology company that was founded in 2007. Using Blue Ocean Strategy, Dropbox was able to create a new market space for online file storage and sharing by offering a simple, user-friendly service that allows people to store and access their files from anywhere. By offering unique value and avoiding direct competition with traditional storage and backup services, Dropbox was able to create new demand and become one of the most successful technology companies in the world.
Uber: This is a transportation company that was founded in 2009. Using Blue Ocean Strategy, Uber was able to create a new market space for ride-sharing by connecting people who need a ride with drivers who have a car. By offering unique value and avoiding direct competition with traditional taxi companies, Uber was able to create new demand and become one of the most successful transportation companies in the world.
Spotify: This is a music company that was founded in 2006. Using Blue Ocean Strategy, Spotify was able to create a new market space for streaming music by offering a vast selection of songs that can be played anytime, anywhere. By offering unique value and avoiding direct competition with traditional music retailers, Spotify was able to create new demand and become one of the most successful music companies in the world.
Apple: This is a technology company that was founded in 1976. Using Blue Ocean Strategy, Apple was able to create a new market space for personal computers by offering the Macintosh, a user-friendly computer that was designed for everyday people. By offering unique value and avoiding direct competition with traditional personal computers, Apple was able to create new demand and become one of the most successful technology companies in the world.
Whole Foods: This is a grocery store chain that was founded in 1980. Using Blue Ocean Strategy, Whole Foods was able to create a new market space for natural and organic foods by offering a wide selection of healthy, high-quality products. By offering unique value and avoiding direct competition with traditional supermarkets, Whole Foods was able to create new demand and become one of the most successful grocery store chains in the world.
These examples show how Blue Ocean Strategy can be used to create new market space and make competition irrelevant, allowing businesses to create unique value for customers and succeed in today’s competitive business environment.
Conclusion
Blue Ocean Strategy is a business strategy that focuses on creating new market space and making competition irrelevant. This approach is in contrast to the traditional “red ocean strategy,” which involves competing in existing markets and trying to outperform competitors. The concept of Blue Ocean Strategy was developed by W. Chan Kim and Renée Mauborgne, and is outlined in their book “Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant.” To implement Blue Ocean Strategy, businesses can use a number of different strategies and tools, such as the Six Paths Framework, the Value Curve, the Four Actions Framework, and the Three Tiers of Noncustomers. By using these strategies and tools, businesses can create unique value for customers and avoid direct competition, allowing them to succeed in today’s competitive business environment. Some examples of companies that have used Blue Ocean Strategy include Cirque du Soleil, GoPro, Zara, Airbnb, Southwest Airlines, Starbucks, IKEA, TOMS Shoes, Amazon, Tesla, Skype, Dropbox, Uber, Spotify, Apple, Whole Foods, and Netflix.
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