Blue Ocean Strategy: Creating Your Own Market
Instead of viciously competing with other companies, find a way to work in a marketplace free of competitors.
- The blue ocean method advises making minor changes to your items so they may enter their own market with cheap pricing and no rivals.
- Blue ocean methods have helped many household-name companies achieve their current status, yet the strategy may be dangerous.
- Identify pain concerns that only your company can solve in order to expand your present staff and pursue a blue ocean approach.
- This article is for company owners that prefer to build their own market than competitive markets.
Consider the scenario where you are unable to reach your income targets due to the goods and services you provide. What if you could find out how to improve your goods and services so they could become a separate sector of the economy?
This is exactly what the blue ocean strategy proposes, despite the fact that well-known companies adopted this technique before a 2004 book gave it a name. We’ll talk about how developing your own market has aided the expansion of numerous firms and how your company may reap the same rewards.
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What is the blue ocean strategy?
The goal of the blue ocean approach is to assist your organization achieve uncontested market space apart from competing, closely related companies. The phrase “blue oceans” is used to characterize these new areas in contrast to the gory “red oceans” that are teeming with deadly rivalry.
The pursuit of high product differentiation and low cost while ignoring the competition is known as the “blue ocean approach.”
The book Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant is where the term “blue ocean strategy” originated. The idea was described in a Forbes article by Professor W. Chan Kim, who co-authored the book with Renee Mauborgne. “Our analysis reveals that blue ocean strategy is particularly essential when supply exceeds demand in a market,” he said. Today, more and more industries are dealing with this issue, and it will become more common in the future.
Pros and cons of the blue ocean strategy
The blue ocean approach might benefit your company or accidentally hurt its operations. To determine if the tactic is appropriate for you, weigh the benefits and drawbacks of the blue ocean.
Pros of the blue ocean strategy
Some advantages of the blue ocean strategy include the following:
You avoid saturated markets.
Your small firm faces competition from larger competitors in your industry, including megacorporation’s. However, if you use the blue ocean technique, your product won’t be exactly like any other while still meeting client wants and being offered at competitive pricing. The influential big names in your sector won’t pose a threat to you in the end.
It introduces growth potential.
Creating new value for your consumers 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.
You’ll meet customers on their level.
Blue ocean thinking places equal weight on value and cost. Your ideas will always be released at a price point that your target market can afford. This strategy decreases the obstacles to purchase for your target market.
Cons of the blue ocean strategy
A few drawbacks of the blue ocean technique are as follows:
It may be too ambitious.
According to the blue ocean strategy’s reasoning, any company may develop a competitively-free, reasonably priced product or service. Being thus inventive isn’t always simple, though. Even if you really have a brilliant concept, practical limitations could prevent you from implementing it.
It may be too risky.
Perhaps you’ve discovered a cost-effective technique to create something wholly original. You may have reached this decision-making point because customers in your small company specialty would buy from you. But what if they are the only customers that are interested in your products? If so, the blue ocean strategy could unnecessarily limit you.
It may be impermanent.
Innovations lead to imitation, therefore over time, a blue ocean may easily turn into a red ocean. Even though a blue ocean approach seems perfect for your company now, it could no longer be feasible in the future.
How to implement a blue ocean strategy
The following actions are advised in the book by Kim and Mauborgne for putting a blue ocean strategy into practice:
- Establish a launch date for your new products, and hire personnel who will contribute to the development of your team and brand identity.
- Identify the strengths and shortcomings of your present team and work to strengthen them.
- Determine any potential pain areas for your existing and potential new clients.
- Create goods and services that solve these problems in ways that no other company has ever thought of.
- Make a formal shift plan in writing and test your new goods and services (as well as the steps you’ll need to take to get there).
Examples of blue ocean strategy
The blue ocean strategy may seem novel, but companies have been employing it successfully for a while — long before Kim and Mauborgne gave it that moniker. Here are three illustrations.
When Ford, a well-known automaker, introduced its now-iconic Model T line of vehicles, most automakers were still building automobiles to suit the preferences of individual customers. This strategy resulted in expensive costs and variable quality.
In contrast, each purchaser could only choose from one colour and type of the Model T. Less personalization resulted in reduced costs and more dependable quality. Ford’s strategy formed the cornerstone of the contemporary car industry.
Nintendo chose not to compete with the Xbox and PlayStation on visuals when it unveiled the Wii in 2006. Nintendo put a higher priority on wireless motion-control gaming, which was not accessible on competing platforms. Nintendo was able to accomplish this in order to release more involved, physical games, such as the Wii Sports series. Both the popularity of the system and the games rose quickly.
Twice, Netflix has successfully used the blue ocean strategy. In 1997, Reed Hastings and Marc Randolph established the firm as the world’s first mail-order DVD rental service. It goes without saying that Netflix eventually popularized the streaming TV paradigm that penetrates almost every facet of contemporary life. In both instances, the plan worked and elevated Netflix to the status of Amazon or Walmart among household names.
Finding blue oceans
Kim and Mauborgne directly disputed Michael E. Porter’s well-known five forces market analysis while without naming him by name. In order to establish if a firm may be lucrative in comparison to other businesses in the sector, Porter’s model examines various aspects.
Supporters of Kim and Mauborgne’s technique would argue that it encourages ruthless competition and staying in the red ocean.
According to Kim and Mauborgne, entering the blue ocean, where you have the water all to yourself, and redefining the rules of competition are the keys to extraordinary commercial success. These tactics aim to make the rival irrelevant rather than to outperform it.
Kim and Mauborgne advise using what they refer to as the “four actions framework” to rebuild buyer value components when creating a new value curve in order to find the illusive blue ocean. Four major questions are posed by the framework.
What criteria ought to be set substantially above the norm for the sector?
What aspects of the competition with other industries may be diminished?
What elements should be deleted from the industry’s long-standing competitive landscape?
Which elements ought to be developed that the market has never provided?
By making businesses investigate every aspect of competitiveness, this exercise helps executives identify the preconceptions they unwittingly have about their industry. They might then look for untapped markets inside their own industry and make the change.
Blue ocean strategy in practice
Kim emphasized how Amazon has transformed from an online store to a digital marketplace that offers almost anything.
He said, “Just think of its initial blue ocean shift in book retailing that separated it from the pack with its offering of the largest selection of books in the world, good prices, automatic confirmation of buyers’ orders, its useful selection on “people who bought this book also bought,” and first-hand reviews on what readers found useful or not in a book.
However, Amazon doesn’t always succeed in fostering blue waters. Mauborgne claimed that it failed against Zappos, eBay, and Apple in a few cases.
When Amazon tried to copy the businesses, it was competing with, Mauborgne claimed, they always failed because they had all established their own blue oceans. The takeaway is that the greatest offence is to make a blue ocean shift and establish your own blue ocean. Imitation is not a successful strategy, especially in the saturated markets that most businesses face today.
Home Depot is another business that initiated a blue ocean shift. According to Kim, Home Depot pioneered the value-cost frontier that gave rise to the multibillion-dollar DIY industry.
He stated that instead of going head-to-head with Amazon when they began to intrude on their market, “they doubled down on delivering what Amazon could not — expertise and assistance to finish sophisticated do-it-yourself tasks like upgrading your bathroom on your own.”
Making the shift to a blue ocean strategy
Businesses can aim to explore for verticals to locate new industries where they may enjoy uncontested market share when there is little space for growth. With a superior product that renders the competition irrelevant, the goal is to satisfy new demand. Unfortunately, it doesn’t always work.
Retailers are having financial difficulties as their outlets grow and American purchasing patterns shift. Among the numerous businesses that have declared bankruptcy over the past few years are retailers like Nine West, Claire’s, and Bon-Ton.
The strategy canvas, which is discussed in Mauborgne’s more recent book with Kim, Blue Ocean Shift: Beyond Competing, is advised for firms that are having trouble. A one-page analytical tool called a “strategic canvas” aids organizations in concentrating on an industry and its main competitive characteristics.
It forces you to examine yourself critically in light of how the market perceives you, Mauborgne added. Retailers who put it into practice would soon realize that they all compete in the same market they have for 30 years and are nearly identical to one another. That serves as a genuine wake-up call, unites everyone, and sparks a powerful drive for change.