What if the goods and services you offer are not reaching your financial objectives? As suggested by the Blue Ocean Strategy, you may figure out how to modify your goods and services to create an industry of your own. The Blue Ocean Strategy might be viewed as the most pacifist of the various existing strategic planning frameworks. According to this strategy, “cutthroat competition results in nothing but a bloody red ocean of rivals fighting over a shrinking profit pool.” Companies should instead explore untapped markets and ways to reinvent the industry. In short, avoid head-to-head competition and focus on innovation. A blue ocean strategy aims to help businesses identify and capitalize on "blue oceans" (untapped, expanding markets) while avoiding "red oceans" (overdeveloped, saturated markets). In a blue ocean market, a business will experience greater success, fewer risks, and higher profitability.
Blue Ocean Strategy is the simultaneous pursuit of high product differentiation and low cost to open up a new market space and generate new demand. It is about making the competition irrelevant by assisting your business in creating and capturing uncontested market space. These new spaces are described as “blue oceans,” a term meant to contrast with the struggle for survival in bloody “red oceans” swarming with vicious competition.
The book Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant was the source of the entrepreneurship industry term "blue ocean," which was created in 2005. The idea was described in a Forbes article by Professor W. Chan Kim, who co-authored the book with Renee Mauborgne. “Our study shows that the blue ocean strategy is particularly needed when supply exceeds demand in a market. This situation is applying to more and more industries today and will be even more prevalent in the future.”
Blue oceans represent all the industries that do not yet exist, the unknown market space, unexplored and untainted by competition. Demand is created rather than contested in blue oceans. Since the game's rules are still being established, competition is irrelevant here. This analogy describes the wider, deeper potential to be found in unexplored market space. It is vast, deep, and powerful in terms of possibility and profitable growth, just like the ‘blue’ ocean.
Red oceans are all of the current industries, the known market space, where industrial borders are established, and the rules of the game are known. Here, companies strive to outperform their rivals in order to snag a bigger piece of the market. Profits and growth are decreased as the market becomes more crowded. Products develop into commodities, leading to a cutthroat competition that turns the ocean bloody red.
Blue ocean strategists recognize that market boundaries exist only in managers’ minds and do not let existing market structures constrain their thinking. They believe that there is untapped additional demand out there. The main issue is how to create it. In turn, this calls for a change in focus from supply to demand, from a focus on competing to a focus on creating innovative value to unlock new demand. There are not many attractive or unattractive industries under the blue ocean strategy since enterprises' diligent efforts can change the level of market attractiveness. New wealth is produced by increasing the economy's demand side.
A red ocean, as opposed to a blue ocean, refers to an environment of fierce competition among numerous industrial competitors. Because the marketplace is crowded with rivals, new companies must fight fiercely for a share of any profits. Red ocean strategists concentrate on creating advantages over the competition in order to survive in the market. Businesses operating in a "red ocean" will adopt quite different business tactics from those operating in an exclusive market. Red ocean businesses focus on luring existing customers through marketing, lower prices, or better products rather than attempting to generate demand.
Your small business faces competition from major competitors in your industry, including mega-corporations. However, if you use the blue ocean technique, your product would not be exactly like any other while still meeting client wants and being offered at competitive pricing. The influential big names in your field would not pose a threat to you.
Creating new value for your customers by balancing product or service innovation with cost and usefulness is known as the "blue ocean" strategy. Word-of-mouth marketing has the potential to boost demand as more people buy what you're selling.
Blue ocean thinking places equal weight on value and affordability. Your ideas will always be released at a price point that your target market can afford. This strategy lowers the obstacles to purchasing for your target market.
The logic behind this strategy implies any business can develop a competitively free, reasonably priced product or service. However, in reality, being innovative is not always simple. Even if you really have a brilliant idea, practical limitations could prevent you from implementing it.
Perhaps you have discovered a cost-effective way to create a product completely original. Perhaps you have customers in your small business specialty buy from you. What if, though, these individuals are the only ones drawn to your offerings? The blue ocean strategy can therefore unnecessarily limit you.
Innovations lead to imitation. Therefore, over time, a blue ocean may easily turn into a red ocean. Even though this approach seems perfect for your company now, it might no longer be feasible in the future.
Netflix introduced new forms of entertainment rather than competing in the market for video rental stores. The Blue Ocean Strategy has allowed Netflix to continuously enter new, untapped markets in an effort to meet demand.
Netflix has successfully implemented the strategy twice. By first launching mail-order video rentals and later developing the first subscription-based streaming video platform. Netflix changed the market by developing an altogether new online DVD rental service rather than attempting to compete with the well-known major companies that only focus on pricing or entertainment options. Customers of Netflix were permitted to keep a DVD for as long as they desired without being charged a late fee.
Since then, Netflix has continued to innovate by moving from DVDs to streaming and then producing its own shows and films. Many other businesses have imitated Netflix following its success. Any new business attempting to introduce a video subscription model would therefore encounter a red ocean.
In October 2021, CEO Mark Zuckerberg announced Facebook’s new name to be Meta. When Facebook first launched, it was at the top of the social network market, which had its own distinct blue ocean. More than a decade later, social networking has expanded into a red ocean.
With the name change, Meta could direct its product offers into the "metaverse," a brand-new, thrilling, and uncharted market. Zuckerberg pictures holograms, virtual reality, and digital environments that resemble the real world in the metaverse. Although the strategy change is unproven, the idea of crossing over from the red ocean of social media to the blue ocean of the metaverse clearly played a role in the decision.
When Nintendo unveiled the Wii in 2006, they utilized the blue ocean. Nintendo looked at non-gamers, whereas Sony and Microsoft, with their pricey consoles, ran focus groups on players. The Wii, a console built on simplicity, functionality, and interactivity, was created with games that significantly increased utility for these noncustomers. It was aimed at the noncustomers of the gaming business.
By utilizing this strategy, Nintendo was able to attract conventional non-gamers and outsell both Sony and Microsoft's combined gaming offerings. It was a big success until the unanticipated and unexpected technological disruption brought on by the emergence of smartphones and tablets.
Nintendo provided another blue ocean method in response to the rising desire for straightforward games, such as the free downloading ones on their smartphones. Instead of competing with the pricey, high-end processing power of PlayStation 4 or Xbox One in 2017, Nintendo released the Nintendo Switch.
The Blue Ocean Shift is a road plan for taking you, your group, and your company to new levels of self-assurance, market development, and expansion. Following a straightforward five-step process that involves your people so they own and drive the process will enable you to move from competitive, red ocean markets to open, blue oceans of uncontested market space, regardless of your size or industry, whether you are a small start-up, large, established company, non-profit, or national government.
This change can be made by anyone, even those who are not an entrepreneur. Anyone can transition from red oceans of fierce competition to blue oceans of open market space by following the phases of the blue ocean shift procedure.
In order to ensure that your zone of change is not overly ambitious in light of any organizational limits you may encounter, it is crucial to first identify the best place to launch your blue ocean effort by directing you towards focusing on the most suitable areas.
Creating a clear image of the present competitive landscape triggers a natural wake-up call in the team and the larger organization about the current state of play. It promotes real alignment and a collective will to make a move.
By pinpointing certain pain points and releasing previously unheard-of value for purchasers, enables you to begin the transition from what is to what could be. Examining the whole demand landscape outside the current industry's grasp helps you steer clear of imagining too narrowly who an industry's clients are.
Here demonstrates how to redefine the strategic playing field in order to build a new market that is both financially enticing and well-constructed.
By facilitating a fair process that strengthens people's commitment to and support for the chosen move, this final stage helps you decide which blue ocean move to pursue. The process culminates in alignment that enables senior management to choose the best choice to move forward with.
The blue ocean challenges businesses to innovate in their fields and provide consumers with highly valuable, one-of-a-kind products. Your business may learn how to implement this form of strategic planning and successfully recreate your market by understanding this strategy and seeing instances of it in action. You can set specific objectives and metrics to track your progress in mapping that blue ocean after you are aware of your competition.
Summary Of Blue Ocean Strategy
Red Ocean vs Blue Ocean Strategy
