When in the market people use and adopt the term “Blue Ocean Strategy” they refer to a publication by W. Chan Kim and Renée Mauborgne, professors of strategy and management at INSEAD, published 2005. In the specific, with the above term, we refer to a market for a product where there is no competition or very small competition.
This strategy revolves around searching for a business in which very few companies and firms operate and where there is no pricing pressure.
In contrast with the statement just presented, in the publication, the authors believe that, in contraposition with Blue Ocean, the Red Ocean stands for a market that is overwhelmed with competitors.
The reflections on the strategy could be evaluated as broad and diversified. The foundations of the basic idea are solid and, to commonly say, they make perfect sense but at the same time, as a business, having a product or service that has no competition is the dream of every company. For many, a strategy that as advices for a business basically tells you to find the “perfect” product or service that has a specific market with almost no competition, might states the obvious. If was that easy we would all have successful businesses. So at the end it is difficult to quantify and predict the success of such strategy in term of costs (to change the mission and vision of a company to a new niche product might request high resources) and whether it will succeed in the end, no one can predict very clearly.
The applications of the strategy are broad as the basic line to follow the Blue ocean strategy it means your goal is not to be better than your competitors but to make this competition useless by creating a new market space. So as long as you can find a niche segment in the market by analysing and researching, you can adopt the strategy in any industry. Furthermore, the publication also give you a specific framework to follow, with a scheme to apply the strategy that includes the following points:
Raise. What can be improved in the existing industry?
Reduce. What results did the competition with other companies cause and can we remove them?
Eliminate. What features of the existing industry should be eliminated?
Create. What new features can the company create that other businesses have never offered?
A notorious example of the Blue Ocean Strategy is The Cirque Du Soleil. Formed in Canada in the early 1980s, the company has since gone on to entertain 155 million people in over 300 cities. How? Cirque du Soleil reinvented the circus industry by pursuing both low cost and differentiation.
To summarize, a company must master its traditional markets using conventional strategic planning tools. It will always be important to swim successfully in the Red Ocean by out-competing rivals. Red Oceans will always matter and will always be a fact of business life.
Said that, in order to focus on Red Ocean is therefore to accept the key constraining factors of competition and to deny the distinctive strength of the business world: the capacity to create new market space that is uncontested and to further sustain high performance, companies must create their own Blue Oceans, and make the competition irrelevant.
They key base-line of the strategy is to ‘Focus on the Big Picture, not the Numbers’. By using Blue Ocean Strategy, industries can compare their businesses with their competitors by using this approach as canvas’ to identify which strategy needs to be changed. In the end actualize the strategy that allows company to close the gap by converting Red Ocean sequence into commercially viable Blue Ocean ideas. Companies can translate the introduced ideas into real products to reach the two and three tiers of non-customers by using several BO tools such as value curves, strategy canvas, six path method, six-path process, four actions framework, and utility matrix. It is recommended that the Blue Ocean strategy should be implemented in different industries and segments companies should break out of the accepted boundaries that define how they compete and go through innovative strategic planning. Researchers should also understand and model the market changes and match it with the Blue Ocean strategy tools adopted.
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