What is Blue Ocean Strategy? Examples, Pros & Cons!

This step may seem evident, but it was found that managers often outsource this part of the strategy- making process. They rely on reports that other people Iike research agencies, consultants. This is how a jump in value for both the company and its buyers is achieved. Value innovation happens only when companies align innovation with utility, price, and cost positions.

Since there is no competition, the business can set its prices without competitor constraints. It also makes it easier for the business to make its prices flexible in various directions. When a company has a ‘competitive advantage,’ it has an edge over its rivals. It has something that consumers like, but its rivals do not have. The circus realized that people did not want to go to the circus any more. Everybody had become more aware of animal abuse, especially within the circus industry.

Since market boundaries are not defined, it can be reconstructed by new ideas of the industry players. Blue Ocean strategy and Red ocean strategies are widely used by startups. However, it is also perceived in MSMEs as well as Multinational enterprises and these strategies help them in finding the right market.

• Thus, the business world has pulled up their socks and is striving to skip the “Red Oceans” to create their very own “Blue Oceans”.
• Learn how to put these practical market-creating tools into practice to move from red ocean of competition to blue oceans of new market space and to do so in a way that people own and drive the process.
• Blue Ocean’s approach shuns the ideology of outperforming the competition and asserts to recreate the market boundaries and operate within the nascent.
• Before entering the market, you will have to conduct thorough research and analyze whether there is a new trend or a new demand in the market.
• The formulation of blue ocean strategy is comprehensive only when firm address adoption hurdles in the beginning to ensure the successful actualization of blue ocean idea.

Because the marketplace is crowded with rivals, new companies must fight fiercely for a share of any profits. Business leaders with innovative products blue ocean meaning and services who can identify blue ocean markets have endless opportunities. Perhaps the best example one can give of blue ocean strategy is Netflix.

Dropshipping – A New and Viral Business Model

As for the ocean, the water absorbs the longer wavelengths reflecting scatters of blue. Still, its color is also influenced by the color of the sky, algae, other plants, and sediments. Unlike most colors, blue is seen as not polarizing and non-controversial. Hence why many companies and web designers choose this cool color. Blue, blue-green, and green are considered sacred colors in Iran, where they symbolize paradise. Oyo Rooms LogoOyo Rooms is a hotel chain founded by Ritesh Agarwal.

It is increasingly important; to know from the start what price will quickly capture the mass of target buyers. Value innovation requires companies to orient the entire organization toward achieving a leap in value for both buyers and themselves. Without such integral approach, innovation will remain dethatched from the core of strategy. By running both frameworks together, you can find uncontested markets and chart the course to get there. Our SoftwareFor Strategic Planning Drive strategy execution across your organization.For Strategy Reporting Optimize your reporting process to save time. For Project Management Manage the right projects, with the right level of detail.For Local Government Use ClearPoint to drive efficiency and transparency.

In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored. Is the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand. It is about creating and capturing uncontested market space, thereby making the competition irrelevant.

Unexplored and untainted by competition, ‘blue oceans’ are vast, deep, and powerful in terms of opportunity and growth. If you stay on this path, the basic shape of firm’s value curve will begin to converge with those of the competition. To avoid the trap of competing, firm need to monitor value curves on the strategy canvas. Monitoring value curves indicates when to value-innovate and when not to. It also keeps firm from pursuing another blue ocean when there is huge potential from current offering is remaining.

The intangibility of blue is a key to many of its symbolic meanings. Today’s article is about not only the symbolism but also the meaning of the color blue as part of theColor Meaning Series. Investments in securities market are subject to market risk, read all the related documents carefully before investing. For a startup, both Blue Ocean and Red Ocean strategies aren’t a lot of worries as it absolutely relies on the possibility that you have and how well you execute it. One of the most important ways to win over in such a market is by providing a lot of value for your consumers.

Meanings of Blue Shades

Enhance cognitive skills – Researchers have found that blue, together with red, enhances cognitive abilities. Lower our heart rates – Which is why we receive the overall feeling of relaxation and calmness. A few other meanings of the color blue are trust and honesty as it instills confidence and inspires feelings of loyalty and integrity. On one side, the blue color means loyalty, honesty, trust, responsibility, calm, commitment, wisdom, and serenity. According to many scholars, it is a crucial color in the Bible as it symbolizes heaven.

At the same time, it unlocks a new demand and makes the competition irrelevant. The strategy revolves around devising innovative products and services and acquiring the uncontested market by creating new demand. It further states that there is no relevance of peer competition since the industries designed under this strategy are non-existent. Businesses can create new products, and in turn, generate demand, by making unique products familiar to their customer base and by adding advanced features that make it stand apart. Once a firm has formulated a blue ocean strategy with a profitable business model, it must execute it. Companies often have a tough time translating strategic thought into action whether in red or blue oceans.

More important, the managers will be in a position to draw a future strategy that would be distinctive. Most important aspect of this stage is to make it transparent free from politics. The judges were asked to explain their picks, adding another level of feedback to the strategy-making process. Judges were also asked to explain why they did not vote for the other value curves. Usually the field research toppled many of the conclusions managers had reached in the first step of the strategy creation process. Huge Collection of Essays, Research Papers and Articles on Business Management shared by visitors and users like you.

Blue Ocean Strategy – Meaning & Need of Blue Ocean Strategy

Kim and Mauborgne explain that the aim of companies is to create blue oceans, that will eventually turn red. This is the same idea expressed in the form of an analogy. Ridderstråle and Nordström also claimed in 1999 that « in the slow-growth 1990s overcapacity is the norm in most businesses ». Kim and Mauborgne claim that blue ocean strategy makes sense in a world where supply exceeds demand. The book mocks the phenomena of conventional choice between product/service differentiation and lower cost, but rather suggests that both differentiation and lower costs are achievable simultaneously.

These kinds of market forums can be correlated with the shark-infested ocean waters which remain spilled with blood. Thus, the business world has pulled up their socks and is striving to skip the “Red Oceans” to create their very own “Blue Oceans”. We call this type of marketplace a ‘red ocean.’ In this context, ‘marketplace’ means the same as ‘market’ in its abstract sense. In their 2005 publication, the authors stated that companies were better off exploring new markets. They believed that competing in a saturated market was a bad choice.

Explanation means that everyone involved and affected should understand why final strategic decisions are made. An explanation of the thinking that underlies decisions makes people convinced that managers have considered their opinions and have made decisions impartially in the overall interests of the company. By placing kingpins in a fishbowl in this way you greatly raise the stakes of inaction. Light is shined on who is lagging behind, and a fair stage is set for rapid change agents to shine. Importantly, for fishbowl management must be based on transparency, inclusion, and fair process. To break the status quo, employees must come face-to-face with the worst operational problems.

Earlier compact disks or CDs were used as a traditional medium to distribute and listen to music. The high volume generated by a value innovation leads to rapid cost advantages, placing potential imitators at an on-going cost disadvantage. It drives them to simultaneously pursue differentiation and low costs to break the value-cost trade-off. Poor strategic Process Can Ruin Strategy Execution as it creates indignation, distrust, resentment and finally non-cooperation / refusal. After tipping cognitive hurdle let us understand how to tip resource hurdle.

What exactly is a Blue Ocean Strategy?

The competition is often so intense that some firms cannot sustain themselves. This type of industry describes a red ocean, representing a saturated market bloodied by competition. Nintendo’s Wii video game console, first released in 2006, has been often considered an example of the blue ocean concept. These changes brought new gameplay ideas to the system as well as https://1investing.in/ reduced the cost of the console compared to its competitors. As a result, the Wii sold more than 100 million units over its lifetime, far outselling the competitors. The Blue Ocean Strategy proposes that instead of fighting for a share in the highly competitive but shrinking market, feast on the unexplored new segments, thereby making the competition irrelevant.

Since there is no competition in the industry, the first entrant to the market can gain the maximum advantage based on the blue ocean strategy. They can gain a maximum market share and maximum profit advantages. When there is limited room to grow, businesses try and look for verticals or avenues of finding new business where they can enjoy uncontested market share or ‘Blue Ocean’. A blue ocean exists when there is potential for higher profits, as there is now competition or irrelevant competition. Importantly, if company’s offering falls on the same space or spaces as those of rivals, chances are it is not a blue ocean offering.

KEY POINTS OF BLUE OCEAN STRATEGY & SHIFT

Here, the strategic choices for firms are to pursue either differentiation or low cost. In the Reconstructionist world, however, the strategic aim is to create new best-practice rules by breaking the existing value cost trade-off and thereby creating a blue ocean. Competition- based red ocean strategy presumes that an industry’s structural conditions are given and that firms are forced to compete within it. This assumption based on what the academics call the structuralist view, or environmental determinism. It is essential if firm has to arrive at a cost structure that is both profitable and hard for potential competitors to match.

If they fail to support innovation with value in this way, technology innovators and market pioneers often breeds ideas that other companies exploit. Importantly, value innovation is not something as “value-cost trade-off”. Most likely, your organization is already running on an existing strategic planning model. Luckily, the Blue Ocean Strategy can be paired with other models.