Blue Ocean Strategy, Examples of Blue Ocean Strategy, The 8 Key Points of Blue Ocean Strategy, Difference between Red and Blue Ocean Strategy, Blue Ocean Four Action Frameworks, How to Use Four Action Templates, Eliminate, Reduce, Raise, Create, Conclusion.
Blue ocean strategy
Blue ocean strategy refers to the uncontested marketing policy that focuses more on the new innovation to reinvent the business rather than head-to-head competition. W. Chan Kim and Renée Mauborgne together introduced the Blue ocean strategy in 2005. It is a simultaneous process of opening a new business market and creating new demand, therefore, competition is irrelevant.
Examples of Blue Ocean Strategy
There are several examples of the blue ocean strategy all over the world that have been accepted by many industries to get benefits such as Canon, iTunes, Cemex, Philips, Netjets, Curves, JCDecaux, Quicken, Polo Ralph Lauren, and so on. iTunes solved the problem of recording industries when it started the business. Before launching iTunes, consumers download a song illegally from the internet platform. ITunes’s blues ocean strategy created a new way of selling music legally, where consumers and artists became mutually benefited. They managed to make a new category of music selling through digital music platform for listeners. Still, it is dominating the marketplace of music platform for years.
The 8 Key Points of Blue Ocean Strategy
The eight key points of the Blue ocean strategy are as follows;
- It’s grounded in data.
- Pursues differentiation and low cost.
- Creates an uncontested market space.
- Empowers you through tools & frameworks.
- Provides a step-by-step process.
- Maximizes opportunity while minimizing risks.
- Builds execution into strategy.
- Shows you how to create a win-win outcome.
The Ten (10) Difference between Red Ocean and Blue Ocean
|1||The contest in the same market||Create uncontested new market|
|2||Beats competitors||Competitors irrelevant|
|3||Pursues both cost and differentiation||Chosen between cost and differentiation|
|4||Make the value-cost trade-off.||Break the value-cost trade-off.|
|5||Capture new demand||Exploit existing demand|
|6||Focus on rivals within its industry||Focus across the alternative industry|
|7||Intend to provide better service to buyers||Redefine the buyer group|
|8||Focus on current customers||Focus on new customers|
|9||The market is already established||Need to make the new market|
|10||Example: Canon, iTunes||Example: Ryanair, Southwest|
Figure 1: Differences Between Red Ocean and Blue Ocean Strategy
Three Most Important Differences Between Red Ocean and Blue Ocean Strategy
Focus on current customers vs. focus on non-customers.
In the red ocean strategy, most industries focus on attracting existing customers to sell more products and services. Thus, they focus on the current customer to make benefit by selling products and services.
In contrast, the blue ocean strategy, the industry tries to change the pattern of the business to yield something new for the customers. The company also broadens the area of business to come up with new products or services for the customers, therefore customers are irrelevant here. Thus, this strategy allows the company to focus on business patterns rather than customers.
2. Compete in existing markets vs. Create uncontested markets.
From the perspective of the red ocean strategy, the industry is doing business with the customers where some industries gain more clients and some other industries lose clients. At the end of the day, they are doing business among the same customers. They are competing with each other to get more customers. The company will earn more money if they can bring more customers to its umbrella.
The blue ocean strategy never suggests the company to compete because it makes a new uncontested marketplace. The product and service are totally new therefore no company will come to compete with you. So, this strategy creates an uncontested market to serve its customers.
3. Beat the competition vs. Make the competition irrelevant.
The competition must exist in the marketplace of the company that follows the red ocean strategy. They compete with each other for selling more products and services to increase profit margin. So, they always intend to beat the competitors through marketing policy, product quality, and services.
The blue ocean strategy makes the competition irrelevant because they need not compete with other industries to sell products and services. It makes a totally new marketplace for the industry.
Blue Ocean Four Action Frameworks
Chan Kim and Renée Mauborgne developed the four action frameworks to destroy the trade-off between low cost and differentiation and to rebuild an industry’s strategic logic. The four Actions Template determines whether the investment money in the proper ways around the product to maximize consumer gain and minimize consumer pain. It also assesses the gains that matter with this template and pains that matter for your product. This is the best way of getting the most benefit with the least price within the total product market.
Figure 2: Blue Ocean Four Action Frameworks
How to Use Four Action Templates
Step 1: Eliminate
First of all, you have to think about the factors of the industry that need to be eliminated because of defectiveness. Find out the factors where you give huge investment and efforts, but getting very little output. These factors also can be made more contribution in the past but now useless, so you need to eliminate them because of becoming obsolete at the present time.
Step 2: Reduce
Secondly, you need to identify factors that are not completely necessary for the industry and also can not contribute to the industry’s benefit properly. These factors are well below the industry’s standard. For example, the higher cost of manufacturing of the product can be reduced.
Step 3: Raise
These are the very important factors that need to be increased to fulfill the industries well above standards. For example, in order to exceed the customer’s challenges, the company needs to rebuild features of the industry.
Step 4: Create
These are the totally new features that the company never provided. To create these new features, you need to investigate the customer’s desire to fulfill. The industry can create new products or offer new services for consumers in an innovative way. It will help the company to create a new marketplace distinguished from the competition.
In short, Red ocean strategy refers to competing for the existing marketplace where blue ocean strategy denotes making new uncontested marketplace. Based on the discussion, it is safe to say that the blue ocean is a better strategy that can bring fewer risks, more success, and increased profits for the company. In addition, the four action templates appear as the best solution to identify the investment of the industry is in the proper way or not. Hence, the blue ocean strategy and the four action frameworks have become an innovative invention for the business arena.