Blue Ocean Strategy What Is It, Examples, Principles, Advantages

By the simultaneous pursuit of differentiation and low cost, Value Innovation creates a leap in value for both buyers and the company. Value innovation challenges this convention by creating a new value curve that offers both higher value and lower costs than the competition. As globalization shrinks trade barriers between nations and regions, information on products and prices become instantly available.

Reach Beyond Existing Demand

In those red oceans, companies try to outperform rivals to grab bigger slices of existing demand. As the space gets increasingly crowded, profit and growth prospects shrink. Despite a long-term decline in the circus industry, Cirque du Soleil profitably increased revenue 22-fold over the last 10 years by reinventing the circus. Rather than competing within the confines of the existing industry or trying to steal customers from rivals, Cirque developed uncontested market space that made the competition irrelevant. If the company is obsessed with hanging on to existing market share, it tends to fall into the trap of focusing on the competition, and not the buyer.

Here, differentiation and low cost represent alternative strategic positions in an industry. In this case, either park the idea, or rethink it until an affirmative answer is reached. blue ocean strategy meaning Over time, functionally oriented industries become more functionally oriented and emotionally oriented industries become more emotionally oriented. When companies challenge this functional-emotional orientation of their industry, they often find blue oceans. For example, Novo Nordisk6, the Danish insulin producer created a blue ocean in the insulin industry by shifting their buyers from doctors to the patients themselves.

Key Takeaways

1. Products are commoditized, and cut-throat competition turns the ocean “bloody” – hence the word Red.
2. American automobile company Ford Motors is one of the perfect examples of the blue ocean technique.
3. What’s more, companies that understand what drives a good strategic move will be well-placed to create multiple blue oceans over time, thereby continuing to deliver high growth and profits over a sustained period.
4. In conclusion, BOS aids businesses in increasing their profits by exploring new markets, tapping into untapped ones, crafting a one-of-a-kind proposition, and focusing on cost efficiency and differentiation.

When household-name automotive company Ford launched its now-legendary Model T series, most manufacturers were customizing cars to each buyer’s needs. Instead of viciously competing with other companies, find a way to work in a marketplace free of competitors. Use market research and customer segmentation to create content and social media marketing campaigns that increase product reach and build brand awareness. Ask them what is working well, which process can be improved, and if there are any defects in the product.

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. Strategy Canvas is a one-page visual analytic that depicts the way an organization configures its offering to buyers in relation to those of its competitors.

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

The main focus of the Red Ocean Strategy is on gaining a competitive advantage through better products or lowered pricing. Growth is limited in this marketplace because thousands of other ‘fish’ occupy the same space. 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.

This curve enables direct competitor comparison, giving you an edge in predicting success. Companies must first distance themselves from conventional methods to enter the Blue Ocean Market. Taught at INSEAD Business School, this strategy is considered a part of strategic management, advocating that companies shouldn’t compete against each other but instead forge their own path. Imagine that Netflix is considering using AI to create unique-to-the-viewer, on-demand entertainment experiences.

Use the Six Paths Framework to identify unmet customer needs and create new market space. Explore alternative industries, strategic groups, buyer groups, complementary products, functional-emotional orientation, and time to discover innovative opportunities. The basic principle of Blue Ocean Strategy is to map out, in addition to the (already) known markets (‘red oceans’), the ‘blue oceans’. Instead of trying to beat the competition and steal a share of existing demand from other automakers, Ford reconstructed the industry boundaries of cars and horse-drawn carriages to create a blue ocean. At the time, horse-drawn carriages were the primary means of local transportation across America. Horses could easily negotiate the bumps and mud that stymied cars—especially in rain and snow—on the nation’s ubiquitous dirt roads.