Renée Mauborgne and Chan Kim, the two management experts in their book, “Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant” spoke about how to be better than the rivalry and do business in an “uncontested market space”. As the authors said, most of the firms these days follow the red ocean strategy and that’s what needs to be changed. Firms should be motivated to use the blue ocean strategy. This article covers everything that one needs to know about the blue ocean market and its strategies.
What is the Blue Ocean Strategy?
The market space or industries that are unknown and not in existence in the present day is known as blue oceans. It is known as blue oceans because it is powerful, deep, and vast when it comes to growth and opportunity as well as untainted and unexplored by competition. Whereas the creation of new demand is known as the blue ocean strategy. In other words, it is tapping and defining into markets that are new and not jumping into oversaturated existing markets. In this strategy, the concern of the businesses is not the competition but they themselves. It encourages businesses to suspend whatever they know about success building and start thinking about business strategies in a new and different way.
How to Create a Blue Ocean?
Now that the blue ocean strategy definition is clear, it is time to know how to create a blue ocean. Blue ocean is all about creating and not finding. Here is how one can create the same:
- The current reality needs to be defined. The firm owner needs to find the key attributes of the services and products in their industry.
- The new audience that needs to be target has to be found. This can be done by simply researching what group of people prefer the key attributes of the service and products that the firm deals with.
- The services and the products whose aspects are not much valued by the targeted audiences need to be altered. This move is very essential as it helps to lower costs and create value.
- On following the above step, a lot of savings is realized which further creates an opportunity for the services and products enhancement based on what the new targeted customer prefers and values.
How to shift to Blue Ocean from Red Ocean?
A blue ocean shift is when one moves themselves, their team as well as the organization to markets that are new and wide-open from cut-throat markets in a manner that allows the employees and people to drive and own the process. The 3 main components that need to be followed in order to move from the bloody competition of red oceans to the new market space of blue oceans.
The strategist of the blue ocean should have the right perspective and mindset.
The market-creating process and tools as well as the guidance o applying the same should be clear
The confidence level of the people should be built at the very start in each level to own and drive the entire process
The need for the Blue Ocean
The reasons for the rise in the implementation of blue ocean strategies are:
- Industrial productivity has improved substantially because of an acceleration in the technological process. This growth has allowed traders to produce an extraordinary array of services and products. It results in an increase in the number of industries where supply is more than demand.
- Due to globalization and trade barrier reduction between regions and nations, the markets continue to become niche, the service and products become available globally as well as there is no scope for monopoly.
- There is no evidence of a global increase in demand. And according to statistics, there is a decline in population even in some developed markets.
The combination of the above three forces has created augmented commoditization of services and products apart from price increase wars and profit margin shrinks. The management and the strategy of the 20th century that was being advocated is disappearing. There is an increase in the cutthroat of the competitive markets because of which the management needs to give attention to the blue ocean strategy.
Blue Ocean’s Characteristics
The blue ocean strategy’s characteristics revolve around the following three characteristics.
The value curve and the strategic profile of the companies should show the focus behind the great strategy clearly. Capitalizing across the board, corporations let their business models expensive.
Companies lose their distinctiveness when forming their corporate strategies reactively trying to keep pace with their rivalry. It is necessary for the value curve of the strategist of the blue ocean needs to stand apart. Creating, raising, reducing, and eliminating are the four actions that need to be applied for setting apart the profile of one industry from others.
A compelling tagline and being clear-cut is always a part of good strategies. The tagline should always have a clear message as well as the offering provided should be advertised truthfully to make sure that the customer does not lose interest and trust.
The Leadership Process of Blue Ocean
The 4 step process of blue ocean leadership was developed by Renée Mauborgne and W. Chan Kim. It allows the leader to conserve time while understanding the changes that need to be made to bring the best out of people.
Step 1: the leadership quality needs to be seen
Step 2: The alternative profiles for leadership needs to be developed
Step 3: the to-be profile of the leadership needs to be selected
Step 4: the new practices of leadership needs to be institutionalized
“Blue Ocean Leadership Grid” and “Leadership Canvas” are the analytical tools that are used for blue ocean leadership. The organizations and the leaders get to track, measure, and see the leadership changes practically through these tools.
Blue Ocean Strategy Oceans Principles
- Market boundaries should be reconstructed
- Rather than focusing on the big number, pay attention to the bigger picture
- Reach past existing demand
- The sequence of the strategy should be set right
- The hurdles of the key organizational should be overcome
- Execution should be built into the strategy
Blue Oceans Examples
Here is a list of examples of the blue ocean strategy.
When it comes to blue oceans Brainchild, Uber is the company that comes first. The transportation industry scenarios have been transformed drastically by discarding unwanted arguments, meter issues, service denial, and can booking nuisance. This service allows cabs to book cabs with ease of taps and swipes. Through the uber app, the driver’s progression can be traced towards the pickup point. A new market was developed by uber with the amalgamation of modern devices and advanced technology. It developed a business model that is low in cost as well as segregated itself from the regular cab firms. This model came with a flexible pricing strategy and payment system which is beneficial for both the company and drivers. Despite having many rivalry uber hold 69% of the US market share.
With the launch of iTunes in the year 2003, apple brought digital music into existence. In older times, people use to listen to music by using a CD player. Recording industries use to face problems, which were solved by the launch of iTunes in the market. Downloading music illegally was cut down as well as the demand for downloading one music rather than the entire album increased. No matter which apple products one is using, they have to download iTunes for listening to music.
Most of the travel companies focus on making itineraries that focus on people who wants to go on holiday to relax. But, backroad’s(an Indian company) blue ocean strategy is about people going on trips as a “luxury active travel” or “fitness-based travel”. They make itineraries where people get to experience campaigning, biking, hiking, etc.
Cirque de Soleil
This Canadian company formed in the 1980s is very famous for its blue ocean strategy. Instead of following the traditional circus schemes, i.e using animals for entertainment, they focused on the storyline and live music by taking inspiration from the “world of theatre” and physical skills of a human. As a result, the public is ready to pay higher amounts to see this unique and extraordinary entertainment source. Today it is there in more than 300 cities and more than 155 million people are entertained by it.
Differentiation and low cost, which are blue oceans key principles were followed by Nintendo Wii. To reduce cost, this gaming company reduced the graphic and quality processing as well as got rid of DVD and hard disk. To differentiate itself from others it came up with a motion control stick. Rather than competing with the red ocean companies like X-Box and Playstation, it opened a new market. With a price point that is affordable, new features, and innovation, Nintendo Wii expanded its new market where non-gamers were spammed, parents and elderly with young children.
Cassella wines developed a new brand for wines, which is a perfect example of the blue ocean strategy. This strategy used by yellowtail brought success to the firm within three years and today is the fastest-growing brand for wines. This company ditched the traditional concentration on respected vineyards and complex terminologies in wine bottles. They instead made a sweet drink that gained the attention of not just wine drinkers but the spirit and beer drinkers as well. To make sure sure that their client does not get confused they just came up with two categories that are the white and red wine.
Difference Between the Red and Blue Ocean
People need to know the difference between both the ocean strategies for making sure it is effective.
So before starting a business strategy plan, one should evaluate both the red ocean strategy as well as the blue oceans strategy. But as seen above, there are perfect examples of firms that make a huge profit because of using the blue oceans strategy. To conclude, one can say the blue ocean is more theoretical, there is no need for the competition here, which shows how low cost and differentiation can coexist and there are frameworks available that let to test the ideas.