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The Blue Ocean Strategy Explained

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The idea of ‘healthy competition’ is usually synonymous with growth, whether its sports, academics or a business place. Yet, two business leaders shattered this misconception with their innovative marketing strategy, called the Blue Ocean Strategy.

The Blue Ocean Strategy is a growth-oriented model that businesses can use to create new demand and open up new market avenues all while avoiding the competition that prevails in their respective industry. The Blue Ocean Strategy is a relatively old concept. It was first introduced over fifteen years back. Tech giants like Apple have long relied on this innovative marketing scheme to build their presence in the global marketplace. However, for the majority of people, the Blue Ocean Strategy is usually unheard of. It has only recently started gaining traction with the expansion of the entrepreneurial industry [1].

Whether you are on the hunt for ideas for launching a disruptive startup or trying to take your existing business to new heights, it’s essential to know what the Blue Ocean Strategy is and how you can use it. Implementing this strategy can provide you with the best chance for growth and profitability.

Understanding the Blue Ocean Strategy

The Blue Ocean Strategy refers to the pursuit of innovation and differentiation. It is the quest for novel solutions and low-cost measures that can create new market space and ensure lasting success for the enterprise. The main aim of the Blue Ocean plan is to identify and capture uncontested business fields. It focuses on leaving the competition behind rather than trying to rise above it. The strategy is based upon the idea that the structure of any industry and its market boundaries are not set in stone. They are merely a collective representation of the beliefs and actions of the industry players. As such, the entire market space and industry structure can be redefined with business creativity.

The concept was originally presented in a Harvard Business School Press book of the same name published in 2004. It was co-authored by Renée Mauborgne and W. Chan Kim, professors at INSEAD. They claim that these strategic steps can boost value for the company and its buyers, employees, and other stakeholders. The book provides analytical tools and structured frameworks to help organizations explore and conquer ‘blue oceans’ in a systematic way.

Setting Your Business Apart: Blue vs Red Oceans

To fully understand the Blue Ocean Strategy, you need to first understand the terms ‘blue ocean’ and ‘red ocean’ as coined by Mauborgne and Kim.

Red ocean refers to all the industries in existence today. It is the market space people are already familiar with. The main characteristic of red oceans is that there are long-established rules of competition. The industries boundaries are well defined, and everyone accepts them. In these spaces, the only way for a company to grow is to outperform its competitors. The playing field starts crowding, eventually leading to reduced profits and market share. The ‘cutthroat’ competition is what makes the ocean red.

Blue ocean, on the other hand, signifies all the industries that can potentially exist. It is an unchartered business landscape, and as such, is free of competition. In blue oceans, companies create demand rather than fight over it. The space is defined by tremendous growth opportunities that offer both quick returns and rapid development. Competition does not matter in blue oceans as the rules of the game haven’t been set to begin with. The ‘blue’ ocean connotes to the unexplored marketplace. It’s vast, deep and holds endless opportunities for achieving long-lasting success.

One of the best examples of the Blue Ocean Strategy is when Apple ventured into the digital music industry in 2003. By introducing iTunes, Apple opened up a new market for people to sell and download high-quality music at reasonable prices. In other words, it left behind the competition of distributing music via traditional sources like CDs and cassettes.

The IPL matches are a great example of blue ocean in the sports industry. The T20 tournament combines cricket with complementary services of entertainment. It creates differentiation in sports by introducing movie stars to provide entertainment at a low cost [2].

 Another example of Blue Ocean Strategy in Indian companies is when Tata Motors introduced the Tata Nano. While the company continued producing top-of-the-line commercial vehicles, it also diversified operations by establishing a new market for affordable passenger cars. With the Nano, it targeted two-wheelers, small families, and retired people, providing them with a safe and comfortable way to commute with an affordable mini car.

The Strategy Canvas

Implementing the Blue Ocean Strategy requires companies to thoroughly review the market demand and supply and understand customer needs to determine the best way forward.

It is a five-step process for reaching strategic triumphs. The following points briefly discuss the main structural components of the Blue Ocean Strategy:

  1. Choose the right starting point by creating a dedicated team for the Blue Ocean initiative
  2. Clearly define the current state of play
  3. Identify the hidden pain points for customers along with other factors that limit the existing size of the industry, thereby, discover the blue ocean
  4. Reconstruct the market boundaries by developing new opportunities in the blue ocean
  5. Build a systematic marketing plan, conduct rapid market tests, finalize the move and launch the shift

The authors of the Blue Ocean Strategy also draw attention to the importance of the Four Action Framework for creating a new value curve. This involves the following steps:

  • Reduce – Which factors are not so useful for the customers and should be given less significance?
  • Eliminate – Which factors that the industry has long competed on need to be eliminated?
  • Raise – How can your enterprise raise market expectations?
  • Create – What new goods or services can you offer to create new demand?

The Blue Ocean plan challenges businesses to push the boundaries of the industry to build their brand image. It motivates them to offer something unique to the consumers by bringing innovative ideas to the market. Any enterprise, big or small, that wishes to sustain long-term growth and be truly successful in the corporate world must divert resources to exploring its blue ocean.

References:

[1] https://journals.sagepub.com/doi/pdf/10.1177/000812560504700301

[2] https://www.trp.org.in/issues/blue-ocean-strategies-and-indian-companies

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