Author: Elisa Alessandroni
Publication date: 10.10.2023
Blue ocean strategy is a business strategy invented by W. Chan Kim and Renèe Mauborgne in 2005. This strategy focused on creating blue ocean that is new market spaces. Actually, in this place there is no competition and companies don’t have to fight to acquire a slice of the market.
Blue Ocean and Red Ocean
Business world is divided into two different areas:
1. Red ocean that represents the known industries that everyone is dealing with. In this type of area, everyone wants to win the highest part of market share to be the best. But the competition makes this area very cruel, and the prospects of growth are reduced.
2. Blue Ocean represents all the industries not invented yet. There is no competition between industries because new demand is created. There is a huge possibility of growth.
Characteristics of the Blue Ocean
There are two characteristics for creating a blue ocean: differentiation and low-cost strategy.
● The low-cost strategy
This includes prices to attract consumers. We know that one of the main factors to evaluate during a consumer’s decision is based on the price. A low price will inevitably push consumers upon purchase.
● Differentiation strategy
This is based on presenting new and unlike products. In this way consumers will be less sensible at the price and more inclined to spend money for having that product.
Paradox of Blue Ocean Strategy
In a study among 108 companies, scientists have discovered that 86% of new ventures were incremental improvements to existing industry offerings.
Only 14% of the new ventures were aimed at creating a new market. So only a small part of these companies use this approach in their guidelines. This implies that almost all the companies use the red ocean strategy instead of creating new markets and run the riskier route.
Two Examples of Blue Ocean strategy
Cirque of Soleil’s
The first one is that of Cirque of Soleil’s way of working. Circus offers the best of both circus and theater. It has reduced its cost structure, achieving both differentiation and low cost. He has created a new market and attracted new customers that before weren’t used to this industry.
Ford Company
Another example of Blue Ocean is the Ford Company that has created something new that has never happened before. At that time, the most important vehicle was horse-drawn carriages. Ford makes competition irrelevant in this way, replacing the horse-drawn carriages with the modern Ford-T.
Blue and Red Oceans in Business
Finally, we can say that blue and red oceans have always coexisted. For this reason, it is important for a company to understand both strategies. Now, most of the companies use red strategy in their project but they must understand the importance of creating blue ocean spaces.
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