The main purpose of this strategy is to provide value innovation by identifying new customer needs and preferences and offering unique products or services to meet those needs. Blue Ocean Strategy (BOS) has become increasingly popular among businesses looking to create value and gain a competitive edge in the complex business world. They assert that these strategic moves create a leap in value for the company, its buyers, and its employees while unlocking new demand and making the competition irrelevant. The business environment in which most strategy and management approaches of the twentieth century evolved is increasingly disappearing. As red oceans become increasingly bloody, businesses will need to focus on blue ocean strategies than competing within the saturated existing markets.
Blue Ocean Strategy vs Red Ocean Strategy
Blue ocean strategy is a business theory that aims to create new market spaces with little or no competition by providing value innovation. This strategy identifies and explores untapped areas where demand is high, and competition is irrelevant. Ford and Apple are two examples of leading companies that created their blue oceans by pursuing high product differentiation at a relatively low cost, which also raised the barriers for competition. They also were paradigmatic of burgeoning industries at the time that were later exemplified and emulated by others.
Understanding Blue Ocean Strategy Meaning: Definition and Examples
Ford’s revolutionary assembly line replaced craftsmen with unskilled laborers, each of whom worked quickly and efficiently on one small task. This allowed Ford to make a car in just four days—21 days was the industry norm—creating huge cost savings. When a company offers a leap in value, it rapidly earns brand buzz and a loyal following in the marketplace. Experience shows that even the most expensive marketing campaigns struggle to unseat a blue ocean creator. Microsoft, for example, has been trying for more than 10 years to occupy the center of the blue ocean that Intuit created with its financial software product Quicken. Despite all of its efforts and all of its investment, Microsoft has not been able to unseat Intuit as the industry leader.
Rather than limiting your products or services to your industry, explore alternative, related industries. Yakult, for example, identifies as part of the health drink, juice, and pharma industries. However, none of these industries consider Yakult to be direct competition. Answering these questions helps businesses grasp existing industry strategies and create a business model based on the Blue Ocean Strategy, where there is no trade-off between value and cost. In this concept, existing industries in the market today are known as the red ocean.
The difference between Blue Ocean Strategy and Red Ocean Strategy
Price corridor of the target mass is a tool managers used to determine the right price to unlock the mass of target buyers. Costs should not drive prices, nor should the utility be scaled down because high costs block the company’s ability to profit at the strategic price. If the target cost cannot be met, the company must either forgo the idea or innovate its business model to hit the target cost. It found that hitting the golf ball was perceived as too difficult with the small size golf club. In an age where streaming movies was unheard of, Netflix entered a blue ocean by offering just that. It was able to create a new market space for itself by going beyond the conventional DVD rental market (red ocean).
Let’s dive into the depths of the Blue Ocean Strategy and explore its intricacies. In a fiercely competitive saturated market, companies struggle to stay alive over the long-term. After you’ve created your Blue Ocean Strategy and product, it’s time to promote your new offerings and attract a new audience segment. Use focus groups, social media, surveys, demos, and more to see if your customers will actually like your product or if more changes need to be made.
- This market space is crowded with competition and prospects for profits and growth are limited.
- Uber revolutionized how people travel by inventing an online taxi service.
- Chan Kim and Renée Mauborgne, professors at INSEAD,1 and the name of the marketing theory detailed on the book.
- This happened, for example, when Apple created its iTunes music download service in 2003.
- When you identify these strategies, you can also formulate how to go beyond them and create a blue ocean.
Blue Ocean Strategy vs. Red Ocean Strategy
As the market keeps on changing and new companies sprout up, you should create your own space to thrive. It is required to flourish in a market where everyone competes with each other. A new strategy can help if your organization faces a decline in the sale. In the work ‘Blue Ocean Shift’, Kim and Mauborgne take the example of an initiative by the government of Malaysia as a suitable example of a blue ocean strategy. Several countries in the world face an increased rate of crimes, overcrowded prisons, and insecurity. It has an adverse impact on the people who had turned to crime as they cannot come out of it.
Many of these started as blue ocean strategic move at some point before the boundaries disappeared and competition took over. In blue oceans, competition blue ocean strategy meaning is irrelevant as the rules of the game are waiting to be set. Any business that enters this space can address the market without competition.