What is Blue Ocean Strategy? Definition of Blue Ocean Strategy, Blue Ocean Strategy Meaning

The aim of this last action point is to think about the future and about the challenges that customers have not yet formulated. The first objective is to record the current state of affairs in the current market. This includes identifying factors on which players in the industry are competing. Value Innovation is only spoken of when companies gear their innovation activities to utility, cost and price. This means, for instance, that companies generally have to abandon the competition-based theories, such as the Generic Strategies of Porter. This grid helps businesses systematically consider new ways to change the market landscape and create their blue ocean.

Ford is another company that has taken the plunge into a blue ocean strategy to stand out from its competitors. With the introduction of their Ford Focus model, they created an unbeatable combination of comfort, performance, and value – all at a competitive price with more features than other cars in its class. This allowed them to capture a larger market share and create an entirely new space for themselves – uncontested by any rivals! And it’s paid off; Ford’s blue ocean strategy has been highly successful, making them one of the top players in the automotive industry. They assert that the strategic moves outlined in the book create a leap in value for the company, its buyers, and its employees while unlocking new demand and making the competition irrelevant.

Focus on noncustomers

• Traditionally, companies choose to either differentiate their products or services from the competition (by offering higher quality, more features, or better customer service) or to compete on price.
• Look over the blue ocean pros and cons to decide if the strategy is right for you.
• The Blue Ocean Strategy offers a pathway to unparalleled success and growth by focusing on value innovation and unmet customer needs.
• My professional experience is a mosaic of entrepreneurial adventures both in Italy and internationally.

In setting a price, companies look first at the products and services that most closely resemble their idea in terms of form. While looking at other products and services within own industries is a necessary exercise, by itself, it is not sufficient. Customers will compare the new product or service with a host of very different-looking products and services offered outside the group of traditional competitors. Red oceans denote the known market space in which all industries currently operate. This is where industry boundaries are defined and accepted, and competitive rules are set. Companies try to outperform rivals to grab a greater share of existing demand.

Creating blue oceans builds brands.

In contrast to a blue ocean, a red ocean describes an environment of cutthroat competition among many industry players. Because the marketplace is crowded with rivals, new companies must fight fiercely for a share of any profits. High-quality music at a reasonable price offered by Apple became the talk of the town. All the available Apple products have iTunes to download music and have largely ruled the market space for decades.

They argue that creating a blue ocean—a market space that is uncontested and profitable—can be a viable and successful business strategy for companies of all sizes. By creating and capturing a new market space, companies can achieve profitable growth and reignite their industry. Implementing a Blue Ocean Strategy requires strategic vision, innovative thinking, and organisational alignment. By seeking to create new market spaces, businesses are compelled to think creatively and develop groundbreaking products or services. This culture of innovation not only sets companies apart from their blue ocean strategy meaning competitors but fosters a dynamic and forward-thinking organisational environment. An innovative culture can lead to continuous improvement, employee engagement, and a proactive approach to market changes and opportunities.

That’s how Nintendo was able to introduce more interactive, physical games like the Wii Sports series. Involving the members of the organization in the implementation of the strategy also requires significant efforts, including economic levels, which not everyone can sustain. To best implement the Blue Ocean strategy, it is necessary, first of all, to identify one’s niche through market analysis.

Key Concepts of Blue Ocean Strategy

The term refers to the vast “empty ocean” of market options and opportunities that occur when a new or unknown industry or innovation appears. A car, on the other hand, can provide comfort during muddy patches or bumpy roads. Thus, Ford Motors applied the blue ocean strategy, identified the unknown market areas (comfort cars), and applied the same. American automobile company Ford Motors is one of the perfect examples of the blue ocean technique. Before the launch of its series, there was a huge flood of luxury cars in the market. Every car manufacturer focuses on creating expensive, fashionable car models.

Compaq PC servers Compaq created a blue ocean in 1992 with its ProSignia server, which gave buyers twice the file and print capability of the minicomputer at one-third the price. This table identifies the strategic elements that were common to blue ocean creations in three different industries in different eras. We chose to show American industries because they represented the largest and least-regulated market during our study period. The pattern of blue ocean creations exemplified by these three industries is consistent with what we observed in the other industries in our study. Once a company creates a blue ocean and its powerful performance consequences are known, imitators appear on the horizon.

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• Few established airlines had the flexibility to make such extensive organizational and operating changes overnight.
• Here the rules of the competitive game have not yet been defined and the opportunities for growth are greater, both in profits and speed.
• And it’s paid off; Ford’s blue ocean strategy has been highly successful, making them one of the top players in the automotive industry.
• Utilizing tools like the ERRC grid and Four Actions Framework, the AI can propose innovative strategies.
• CTR’s tabulating machineIn 1914, CTR created the business machine industry by simplifying, modularizing, and leasing tabulating machines.

Compared to red ocean, blue ocean strategy represents a significant departure from the status quo. It hinges on a shift from convergence to divergence in value curves at lower costs thus raising the bar of execution challenge. To maximize the profit potential of a blue ocean idea, a company must start with the strategic price and then deduct its desired profit margin from the price to arrive at the target cost.

Challenging the conventional strategies

This involves strategically shifting resources and investments from existing markets (red oceans) to the newly identified market spaces (blue oceans). It may require reshaping business models, reallocating budgets, and repositioning the company’s brand image. GM, the Japanese automakers, and Chrysler were established players when they created blue oceans in the auto industry. So were CTR and its later incarnation, IBM, and Compaq in the computer industry. This suggests that incumbents are not at a disadvantage in creating new market spaces.

By contrast, the Model T came in just one color and model for every customer. Venture strategies are specifically about the technological innovation of companies towards a dynamic market. Blue Ocean Strategy is about value innovation in general, in which no emphasis is put on reducing the speed to market. David is a creative director and marketing professional with a wealth of expertise in marketing strategy, branding strategy and growing businesses.

Tipping point leadership builds on the rarely exploited corporate reality that in every organization, there are people, acts, and activities that exercise a disproportionate influence on performance. The key is conserving resources and cutting time by focusing on identifying and then leveraging the factors of disproportionate influence in an organization. This price-minus costing, and not cost-plus pricing, is critical to arrive at a cost structure that is both profitable and hard for potential followers to match. If a company’s offering belongs to the category of knowledge-intensive products, the pricing must also consider the potential for free riding.

Adopting a Blue Ocean Strategy offers numerous advantages for organisations seeking to differentiate themselves and carve out new market spaces. Firstly, it enables companies to reduce competition by shifting the focus from competing in existing market segments to creating uncontested markets. The Blue Ocean Strategy offers a transformative approach to business and marketing strategy, moving away from the cut-throat competition of red oceans. By applying this strategy, businesses can uncover untapped market spaces ripe for growth. Cirque du Soleil is one of the most cited examples of a successful blue ocean strategy. Founded in 1984, the company redefined the circus industry by combining elements of theatre, dance, and acrobatics.

The term that best symbolizes this is “competitive advantage.” In the competitive-advantage worldview, companies are often driven to outperform rivals and capture greater shares of existing market space. Blue Ocean Strategy (BOS) has become increasingly popular among businesses looking to create value and gain a competitive edge in the complex business world. BOS is used to create an uncontested market space, resulting in profitable growth and increased market share by tapping into untapped markets, creating a unique value proposition, and differentiating from competitors. Blue ocean’s strategy is like a lighthouse in the dark, guiding companies around the world to create uncontested market space.

The 4 Actions Framework / BOS Framework from the Blue Ocean Strategy is particularly valuable when an entrepreneur is trying to achieve value innovation and break up the cost trade-off between value and cost. The developers of this method use terms of red and blue oceans to describe the global market. Incorporating AI, especially Generative Pre-trained Transformers (GPT), into the strategic planning process offers a new dimension in developing Blue Ocean Strategies.

First were high-end clubs that offered both men and women a full range of exercise and sporting options at high prices. Second were low-cost home exercise programs that offered exercise videos, books, and magazines. This framework is used to reconstruct buyer value elements in crafting a new value curve or strategic profile. It poses four key questions, shown below and challenges an industry’s strategic logic.