Blue Ocean Strategy: Meaning, Principles, Examples, Strategy

At the same time, he did away with the clearance racks and coupons that attracted the company’s most loyal customers. In contrast to a blue ocean, a red ocean describes an environment of cutthroat competition among many industry players. Because the marketplace is crowded with rivals, new companies must fight fiercely for a share of any profits. Business leaders with innovative products and services who can identify blue ocean markets have endless opportunities.

Businesses like Cirque du Soleil, Southwest Airlines, and Yellow Tail are prime examples of companies that applied blue ocean principles successfully. You can create a blue ocean by reshaping market boundaries and focusing on “value innovation” to generate fresh demand. This approach significantly differentiates your business from existing rivals. As a business owner, blue ocean thinking can help you differentiate your company and its products or services. Blue ocean strategy is a business theory that aims to create new market spaces with little or no competition by providing value innovation. This strategy identifies and explores untapped areas where demand is high, and competition is irrelevant.

This also led to higher prices, typically between 3,000 to 5,000 yen ($27 to $45). For example, in the airline industry, ground transportation time after flight can affect customer’s choice of whether to fly or to drive. For example, to address their financial planning, customers could buy a financial software package, hire a professional, use a mobile app or simply use pencil and paper.

Once customer needs are identified, the next step is to innovate value propositions. This means developing offerings that provide exceptional value to customers, differentiating from existing alternatives, and creating a compelling reason for customers to choose their products or services over competitors. Businesses often struggle to differentiate themselves and stand out from competitors in saturated red oceans. However, by adopting a blue ocean approach, companies can break away from the fierce competition and create a unique space where blue ocean strategy meaning they can thrive. The blue ocean strategy allows for shaping up a whole new market and helps leaders be innovative in their approach to growing the business. In fact, learning the blue ocean strategy helps people step into leadership roles as it allows them to implement value innovation and drive exponential business growth.

FORCE FIELDS AND INNOVATION

Apply the Eliminate-Reduce-Raise-Create (ERRC) Grid to explore ways to improve your value proposition by breaking away from industry norms. Determine which factors to eliminate, reduce, raise, or create to offer a unique value proposition that differentiates you from competitors. Analyze your industry structure and competitor offerings using the Strategy Canvas to understand the current market landscape.

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Strategic groups refer to a group of companies within an industry that pursue a similar strategy. Fundamental differences among industry players are captured by only a small number of strategic groups. The Strategy Canvas of Apple’s iPhone from the early 2000s (in the figure below) shows the state of play in the handset industry (at the time). The horizontal axis shows key competitive factors the handset phone industry competed on. As globalization shrinks trade barriers between nations and regions, information on products and prices become instantly available.

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• While looking at other products and services within own industries is a necessary exercise, by itself, it is not sufficient.
• In short, the Blue Ocean Strategy offers a powerful framework for businesses to achieve sustainable growth, enhanced profitability, and long-term success.
• BOS is used to create an uncontested market space, resulting in profitable growth and increased market share by tapping into untapped markets, creating a unique value proposition, and differentiating from competitors.
• By simultaneously offering low prices and the convenience of streaming with a vast content library, Netflix quickly become the dominant player in an uncontested market space.
• It was easy to use and did not confuse buyers with too many buttons or models.

Step two involves identifying pain points and opportunities that you can tap into that no one has explored as yet. In order to do this, focus on spotting inefficiencies, frustrations or unmet needs in the current market. Young Urban Project offers unparalleled resources and support to professionals and business owners striving for career advancement. With our Mentor-Led Programs, On-demand courses, and Live workshops, you’ll gain cutting-edge skills and knowledge to thrive in competitive industries. While billions of music files were being downloaded each month illegally, Apple created the first legal format for downloading music in 2003.

Encourages Innovation

The building of a knowledge base should move from maintaining established disciplines, themes, and stable communities to integrating knowledge and improving the interaction among participating scientists. In practising inclusiveness, attention should be paid to overcoming existing fragmentations and marginalizations. These can be related to researchers’ skills, career stage, access to research funding and infrastructure, or the status of innovators from non-academic institutions or countries with lower levels of research intensity. Further, constant attention should be paid to ensuring that topic framings emerging from certain cultures or countries do not become hegemonic in the research discourse.

The blue ocean strategy fundamentally challenges leaders to assess the value rather than the technology. If a company is under siege with its market being infested with more and more competitors, then the blue ocean strategy can provide the impetus to change direction. The Blue Ocean framework is a strategic approach to creating new markets where there is little or no competition. Competition is unimportant in the blue ocean strategy framework since the rules of engagement are not adequately defined and are still in their infancy.

• The Model T’s market share jumped from 9% in 1908 to 61% in 1921, officially replacing the horse-drawn carriage as the principal mode of transportation.
• Addressing these hurdles requires strong leadership, effective communication, and strategic alignment across the organisation.
• The unique value propositions offered by Blue Ocean’s strategies resonate well with customers, fostering strong brand loyalty.
• Here, businesses strive to outperform their rivals in order to snag a bigger piece of the pie.

To fulfill the Blue Economy’s promise of sustainable and just ocean use, its scientific foundation must more fully integrate the social sciences. Drawing on insights from real-world scientific networking initiatives, we identify three key contributions of the social sciences and propose a strategy to redefine the Blue Economy. This strategy anchors knowledge in societal challenges and emphasizes co-creation, the science-policy interface, knowledge integration, and the values of accountability and care. Assess current industry practices and decide what can be eliminated, improved, reduced (either simplified or not done to existing standards), or offered for the first time. The authors highlight three shifts needed to move successfully towards a blue ocean mindset.

Fair process builds execution into strategy by creating people’s buy-in up front. By exercising fair process in the strategy formulation phase, people develop trust that a level playing field exists, inspiring voluntary cooperation during the execution phase. This price-minus costing, and not cost-plus pricing, is critical to arrive at a cost structure that is both profitable and hard for potential followers to match. A second reason is that to a buyer, the value of a product or service may be closely tied to the total number of people using it. Simplicity, fun and image, and environmental friendliness are self-explanatory. A product must reduce a customer’s financial, physical, or credibility risks.

Execution Barriers

Tesla created a blue ocean by targeting luxury car buyers who wanted both performance and environmental credentials—two attributes that traditionally didn’t go together. This allowed them to command premium prices while establishing the brand before moving downstream to more affordable models. The strategy canvas is a simple chart that helps you compare your business with others. You can see what your industry offers and where you can do something different. It shows where the competition is strong and where you can stand out by offering more value or something totally new.

Yellow Tail, an Australian wine brand, successfully implemented a blue ocean strategy by simplifying the wine selection process and targeting casual wine drinkers. Instead of competing with established wineries in the premium wine market, Yellow Tail positioned itself as a fun, easy-to-choose, and easy-to-drink wine. This approach resonated with non-traditional wine consumers and allowed Yellow Tail to become one of the fastest-growing wine brands in the world. For example, consider Napster and Apple’s iTunes in the digital music industry. Both started out to create and capture uncontested market space with digital music.