by Mridhula S Comment Closed

When a company is stuck in a red ocean, or would like to differentiate alongside a business in the already existing market, the 4 Actions Template is a great tool. These businesses extend the industry’s curve by giving customers more for less, but they don’t alter its basic shape. These are businesses whose strategies fall on the margin between red oceans and blue oceans. One of the primary concerns with creating a blue ocean is the risk of imitation by competitors once the strategy proves successful. As competitors observe the new market space and the benefits reaped by the innovating company, they may quickly move to replicate the strategy.

It reduced vineyard prestige, wine complexity, wine range, and cost per bottle. It raised and facilitated ease of selection, and created a sense of fun—an easy and adventurous drinking experience. On this path, a company focuses on the context in which a customer uses their product. Then, you can develop a complementary product or service that solves this pain point and makes it more likely for new customers to choose your brand. In this path, you look within your industry to groups of companies that pursue similar strategies. You can typically rank the players in your industry by their products on a spectrum of budget to premium offerings.

Instead, they aim to carve out new and uncontested market space, often attracting new customers beyond the boundaries of their own industries. And remarkably, many of these businesses are able to thrive even in declining industries. In the context of business strategy, a blue ocean is a new market space that has little to no competition. A blue ocean offers untapped opportunities for an enterprise to innovate new services or products. Thus, a blue ocean strategy offers the potential for high profits and business growth. The experience is like having a strategic advisor at your side, guiding you through the Blue Ocean process in a fraction of the time it would normally take you.

A successful strategy plan can help you grow your business, achieve product differentiation, and create uncontested market space. In a traditional approach, a business is trying to find ways to compete for market share in an existing space. They’re up against similar businesses with similar products or services in a well-defined industry.

But too often, companies take a reactive approach to these trends instead of a proactive one. That means taking an active role in shaping industry trends that are relevant and irreversible – positioning your business to be an industry leader. Advocates of Kim and Mauborgne’s strategy would say this tactic promotes merciless competition, remaining in the red ocean. By contrast, the Model T came in just one color and model for every customer. This article has been researched & authored by the Business Concepts Team which comprises of MBA students, management professionals, and industry experts. The content on MBA Skool has been created for educational & academic purpose only.

  • By thinking in terms of solving the major pain points in customers’ total solution, there could be an opportunity to create a blue ocean.
  • Blue Ocean Strategy challenges the traditional focus on competing within existing industries (red oceans).
  • It also permits users to trace a  driver’s progression toward the pickup point in real time through the medium of a smartphone application called the Uber App.
  • Introducing a new product or service in a blue ocean requires convincing customers to adopt a novel approach or solution.
  • Blue oceans, on the other hand, are the markets that do not yet exist, so there is still a lot of potential there for organisations if they get there first.
  • To do this, make sure team members get firsthand reports of the biggest operational issues and areas for growth.

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. Southwest Airlines adopted a blue ocean strategy, focusing on cost-effective, point-to-point travel. By eliminating unnecessary services and offering low fares, Southwest attracted a new segment of budget-conscious travellers.

It aimed to raise customer service and speed of transport above industry standards. And it created frequent point-to-point departures to offer flexible and simple solutions that reduced travel time and costs for short routes. Kim and Mauborgne recommend creating a visual aid called a strategy canvas to better understand your business and your competitors. The strategy canvas maps out offerings and competing factors to depict the current environment and help you chart a course forward. Too often, a leadership team will develop a new business strategy and then hand it off to managers and employees to execute.

The Blue Ocean Strategy: Definition, Pros, Cons & Examples

With a collection of over two hundred thousand songs, consumers could download an individual song for as low as 99 cents or an entire album for $9.99. Likewise, Starbucks10 did the reverse and turned the commoditized coffee industry (rational) into an emotional experience. Customers now choose Starbucks to spend quality time and socialize over a good cup of coffee. When it started in 1996, the time it took for a haircut was over an hour due to a long process of ritualistic activities.

EOS Traction Clarity Break: Unlock the Full Potential of Your Business

Blue Ocean Strategy challenges the traditional focus on competing within existing industries (red oceans). Instead, it proposes creating an entirely new market space (blue oceans) where competition is irrelevant and demand is created. This framework helps businesses innovate and pursue untapped opportunities that differentiate them from competitors. The first step in implementing a Blue Ocean Strategy is to challenge existing market boundaries and redefine the competitive landscape. This involves looking across alternative industries, strategic groups, buyer groups, complementary product and service offerings, and even across time.

Difference Between Red Oceans and Blue Oceans

This market space is crowded with competition and prospects for profits and growth are limited. Products are commoditized, and cut-throat competition turns the ocean “bloody” – hence the word Red. Addressing these hurdles requires strong leadership, effective communication, and strategic alignment across the organisation.

Test your ideas with potential customers to ensure market traction and refine your strategy based on feedback. Conduct market research, focus groups, and pilot programs to validate the demand for your innovative offerings and gather insights for refinement. It includes points that must be blossomed by the industry in reference to the line of products, price tags, and caliber of services.

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. A second reason is that to a buyer, the value of a product or service may be closely tied to the total number of people using it.

Adopting a blue ocean perspective means opening up your mind to what possibilities could exist, instead of the current state of play. By changing the typical factors of competition, you can achieve cost savings and raise buyer value. Drawing on more than a decade of new research, Blue Ocean Shift is the essential follow-up to Blue Ocean Strategy.

The four organizational hurdles to strategy execution

  • Such alignment enhances efficiency, reduces internal conflicts, and creates a cohesive approach to market opportunities.
  • The blue ocean and red ocean strategy allow innovative leaders and businesses to be able to identify the core areas which can help drive value at a lower, as a detriment to the competition.
  • This strategic planning theory is an escape from the general notion of benchmarking the competition and focusing on lump sum figures.
  • When iTunes ventured into the market, it solved the basic problems which were faced by the recording industry.
  • HR metrics are vital tools for evaluating HR effectiveness, impacting decisions, and aligning with strategic goals.

Navigating modern business’s complex and competitive landscape requires more than incremental improvements and cost-cutting measures. Companies must think beyond traditional market boundaries and seek innovative ways to achieve sustainable growth. Enter the Blue Ocean Strategy, a transformative approach that encourages businesses to explore uncharted waters and create new markets, making competition irrelevant. The Blue Ocean Strategy offers a pathway to unparalleled success and growth by focusing on value innovation and unmet customer needs.

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In some cases, blue ocean strategy meaning we earn commissions when sales are made through our referrals. These financial relationships support our content but do not dictate our recommendations. Our editorial team independently evaluates products based on thousands of hours of research. As your company navigates today’s competitive landscape, you need an Always-On Strategy to continuously bridge the gap between current and desired business outcomes. Quantive brings together the technology, expertise, and passion to transform your strategy and playbooks from a static formulation to a feedback-driven engine for growth.

You can create a blue ocean by reshaping market boundaries and focusing on “value innovation” to generate fresh demand. This approach significantly differentiates your business from existing rivals. Blue ocean strategy is a business theory that aims to create new market spaces with little or no competition by providing value innovation. This strategy identifies and explores untapped areas where demand is high, and competition is irrelevant. Kim and Mauborgne present a case study of a wine company that successfully navigated a blue ocean shift.