Blue ocean Strategy is a strategy for businesses to dominate and hold a monopoly, capable of bringing great profits and influence when there are too many businesses making a similar product, making the market supply exceeds demand, businesses find it difficult to compete, and profits plummet. For more details on this strategy, see Johnson's Blog Read the article below
What is Blue Ocean Strategy?
Blue Ocean Strategy is a business strategic framework developed by W. Chan Kim and Renée Mauborgne in their book “Blue Ocean Strategy: How to Create a Competition-Free Market Space and Make it Competitive.” irrelevant".
The term “blue ocean” refers to a new and unchallenged market space with no competition, while “red ocean” represents a crowded and competitive market space. The authors argue that companies can achieve sustainable growth and profitability by creating blue oceans rather than competing in existing red oceans.
This strategy consists of two main steps:
- Value innovation: This involves creating a new market space by offering a product or service that is significantly different from what is currently on the market and also offers superior value to the customer. This requires companies to think beyond incremental improvements and instead focus on creating an entirely new value proposition that sets them apart from the rest. competitor.
- Strategy map: This involves identifying the key factors driving customer value and then using this information to create a visual representation of the competitive landscape. By analyzing the strategic map, companies can identify opportunities for differentiation and value innovation.
Blue ocean strategy is a strategy to develop and expand a market where there are few or no competitors. Currently, businesses follow this strategy with the goal of finding and pursuing a market that no other business has ever done before.
This strategy focuses attention on creating new markets at the product development stage to encourage managers to focus on creating untapped markets.
This strategy focuses not on winning over competitors but on making competition unnecessary by creating blue ocean opportunities. Those blue oceans are untapped markets in which new customer needs are satisfied.
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Features of the blue ocean market
- The strategy mainly focuses on the subjects that have never been customers: In other markets, businesses will focus heavily on existing customers, while in the blue ocean market, they will try to attract new customers, even those who have never used the product.
- Create a market without competition: When other businesses are trying to compete in the current market, businesses applying blue ocean strategy will have few or no competitors. However, no one knows how to break into this market and your business will take over.
- Where competition is no longer relevant: In this market, competitors cannot copy the idea of your business to turn it into a second, third success, etc. The core of this strategy is to create high value at the cost level. low fees.
- Create and hold every new need: Your own business will be the one to provide different and useful values to attract customers even those who have never intended to use the company's products. This strategic model promotes innovation and influences the focus on strategy development. Instead of using competitors to benchmark, managers develop products and services that can open up and capture a new market.
- The balance of cost and value is broken: With this strategy, businesses have the ability to create high value and ensure low costs. However, the unit also needs to study the nooks and crannies of the process, eliminate unnecessary costs, etc.
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Benefits of Blue Ocean Strategy
There are several benefits to using a Blue Ocean Strategy:
- New market space: Helps companies create new and uncompetitive market spaces that can lead to sustainable growth and profits. By focusing on creating new customer needs and wants, companies can exploit previously untapped demand and generate new revenue streams.
- Differentiation: Enables companies to differentiate themselves from competitors by creating a unique value proposition that is fundamentally different and superior to what is currently on the market. This differentiation can help companies attract and retain customers.
- Reduce competition: By creating new market space, companies can reduce competition and render their competitors unsuitable. This can help companies achieve a dominant market position and maintain it over time.
- Renew: Encourage companies to focus on disruptive innovation rather than incremental innovation. This can lead to disruptive innovations, create new market spaces, and drive growth.
- Customer-centric approach: Focusing on creating new customer needs and wants, which requires companies to have a deep understanding of their customers. By putting the customer at the center of their strategy, companies can better respond to customer needs and preferences.
Overall, Blue Ocean Strategy can help companies achieve sustainable growth and profitability by creating new and uncompetitive market spaces, setting themselves apart from their competitors. competition, reduce competition, promote innovation and put customers at the center of their strategy.
Limitations of Blue Ocean Strategy
While the Blue Ocean Strategy has many benefits, it also has some limitations to be aware of:
- Risk: Creating a new market space can be risky because there is no guarantee that customers will accept the new product or service. This can lead to high investment costs and low return on investment.
- Time-consuming: Developing a Blue Ocean Strategy requires extensive research, planning and implementation. This can be a time-consuming process and companies may not have the resources to devote to such a large-scale effort.
- Limited applicability: Blue Ocean Strategy may not apply to all industries or markets. In some industries, there may be little opportunity to create new market space, or the market may be too small to justify the investment required to create a Blue Ocean.
- Uncertainty: Blue Ocean strategy involves creating a new market space, which means there is little or no historical data to inform decision making. This can make it difficult to accurately predict demand, price, and other key factors that affect success.
- Discontinuity: Blue Ocean strategies can be disruptive to existing businesses and industries, which may lead to opposition from competitors, regulators or other stakeholders.
Overall, the Blue Ocean Strategy can be a powerful tool for generating sustainable growth and profits, but it is not without its limitations. Companies should carefully consider the potential risks and downsides before embarking on a Blue Ocean strategy.
How to find the Blue Ocean
Finding the blue ocean can be a challenging but rewarding process. Here are some steps companies can take to identify blue ocean opportunities:
- Identify customer needs: Start by identifying unmet needs and wants of the customer. Conduct market research, analyze customer feedback, and observe customer behavior to better understand what customers are looking for.
- Industry trend analysis: Analyze industry trends to identify gaps in the market. Look for areas with little competition or where existing products or services don't meet customer needs.
- Consider non-customers: Look beyond existing customers to identify non-customers with unmet needs. These could be potential customers not currently being served by existing products or services, or customers in other industries with similar needs.
- Explore alternative business models: Consider alternative business models that can create new market spaces. For example, companies might consider subscription-based models, sharing economy models, or other innovative approaches that can create new value for customers.
- Leverage technology: Leveraging technology to create new market spaces. For example, companies can use data analytics, artificial intelligence, or blockchain technology to create new products or services that meet customer needs in innovative ways.
- Cooperation with partners: Cooperate with partners to create new market space. For example, companies can collaborate with other companies in different industries to create innovative products or services that meet customer needs.
- Re-imagine existing products or services: Finally, consider re-imagining existing products or services to create new market spaces. For example, companies can add new features or functionality to existing products or redesign existing services to better meet customer needs.
When to use?
Blue Ocean Strategy adds direction to the strategic management process. To direct strategic development focus on creating blue oceans, four questions need to be answered:
- What existing elements of the industry need to be eliminated?
- What factors should be reduced relative to market standards?
- What factors need to be increased above the market standard?
- What elements have never appeared in the industry need to be created?
It is important to focus on what the customer values, not on the competitor or on the company's core competitive advantages. You can create entirely new methods and products by answering these questions.
Two types of blue oceans can be created using the above process: creating an entirely new industry; or create new opportunities from within an existing industry by expanding the strategic boundaries of the industry. Most blue oceans are created this way.
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How to use?
Blue Ocean Strategy is one method that can be used to focus the development of the strategy (by answering the four questions above). However, there are six core principles of Blue Ocean Strategy that can be used to avoid the six main risks commonly seen in new product development strategies, namely: search risk, planning risk , scope risk, business model risk, organizational risk and management risk.
The six blue ocean principles can be understood as “implementation guidelines” for creating untapped empty markets.
- Re-establishing market boundaries: identify the blue oceans in which the search risk is minimal.
- Focus on the big picture rather than the numbers: avoid planning risk by focusing on existing reality.
- Going beyond existing needs: avoid scope risk when assigning the greatest demand to a new product.
- Choosing the right sequence of strategies: reduce business model risk by focusing on building a healthy model that can guarantee long-term returns.
- Overcoming basic organizational barriers: reduce organizational risk in blue ocean strategy implementation.
- Putting execution into strategy: focus attention on work motivation and exploit the capacity of employees to implement blue ocean strategy, thereby overcoming management risks.
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Tips for making Blue Ocean Bets
Implementing a Blue Ocean Strategy can be a complex and challenging process, but here are some key steps and tips to consider:
- Conduct extensive research: Before developing a Blue Ocean Strategy, it is important to conduct extensive research to identify market opportunities, customer needs, and competitive landscape. This research should be continued to ensure that the strategy remains relevant.
- Define value statement: A successful Blue Ocean strategy requires a clear and compelling value proposition that is fundamentally different and superior to what's currently on the market. This value proposition should be clearly communicated to all stakeholders.
- Build a strong team: Implementation of the Blue Ocean Strategy requires a cross-functional team with diverse expertise and perspectives. This team needs a deep understanding of the industry and customers to ensure that the strategy is effective.
- Invest in innovation: Blue Ocean Strategy requires disruptive innovation, which means investing in research and development to create new products or services. Companies should be prepared to invest significant resources in innovation for the strategy to work.
- Follow up and adapt: Blue Ocean Strategy is a dynamic process that requires constant monitoring and adaptation. Companies should be prepared to make adjustments based on changing market conditions, customer needs and other factors.
- Risk management: The implementation of the Blue Ocean Strategy involves risks, including investment risk, market risk and competition risk. Companies should carefully assess these risks and develop risk management strategies to mitigate them.
- Communicating and engaging: Implementation of the Blue Ocean Strategy requires communication and engagement with all stakeholders, including customers, employees, investors and partners. Companies should communicate the strategy clearly and engage stakeholders throughout the implementation process.
Overall, the implementation of the Blue Ocean Strategy requires careful planning, extensive research, investments in innovation, and ongoing monitoring and adaptation. With the right approach, Blue Ocean Strategy can lead to sustainable growth and profits by creating new and uncompetitive market spaces.
When is the right time to revise the Blue Ocean Strategy?
When competitors enter your niche, leaders need to react quickly to protect their market share. The competition is getting fiercer, so managers need to grasp the value of the business on the map to avoid pitfalls.
Through these values on the human map, leaders can determine when to innovate. This seems to become a warning value line when businesses should take action blue ocean Strategy. This will show up when the firm's value curve converges with the top player's value curve.
Based on value monitoring, businesses can avoid finding the blue ocean market and still be able to exploit the current ocean. However, when the value curve is still in a period, managers need to resist the temptation of value reinvention.
Right now, businesses should focus on exploiting, deepening and expanding business directions to expand market share. If the business moves further into different markets, it will have a chance to dominate before many competitors appear.
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Blue Ocean Strategy and Red Ocean Strategy
Blue Ocean Strategy and Red Ocean Strategy are two opposing approaches to business strategy. Here are the main differences between the two:
- Compete: Red Ocean Strategy focuses on competing in existing market spaces, while Blue Ocean Strategy focuses on creating new market spaces with no competition.
- Value statement: Red Ocean strategy often involves offering products or services similar to competitors, but with incremental improvements in price, quality, or features. Blue Ocean Strategy involves creating a new value proposition that is fundamentally different from and superior to what is currently on the market.
- Focus on customers: Red Ocean Strategy focuses on satisfying current customer needs, while Blue Ocean Strategy focuses on creating new customer needs and wants.
- Risk: The Red Ocean Strategy is often considered a less risky approach, as companies are competing in established markets. Blue Ocean strategy involves more risk, as companies are creating new markets and there is no guarantee of success.
- Renew: Red Ocean Strategy involves incremental improvements to existing products or services, while Blue Ocean Strategy involves disruptive innovation and the creation of entirely new markets.
Blue Ocean Strategy focuses on creating new market spaces and is free from competition, while Red Ocean Strategy focuses on competing in existing markets. Both approaches have benefits and limitations, and the best approach depends on the specific business context and goals.
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Example of Blue Ocean Strategy
To help you better understand this blue ocean strategy, here are two examples that have used it successfully.
iTunes is a multimedia player such as music, photos, ... developed by Apple. The idea emerged from the illegal sharing of music files. In 2003, Apple launched iTunes to provide a list of individual songs and have a reasonable pricing strategy. This application makes it possible for customers to buy individual cards instead of buying a full set of CDs.
Currently, iTunes accounts for about 60% of the global music download market.
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This is a large corporation in Japan that is very successful in the field of manufacturing products for cameras, printers, optics, etc.
The company has also adopted a blue ocean strategy to market the desktop copier industry. Compared to its competitors, this group is also manufacturing traditional copy machines and the target audience is office equipment department managers, …
However, Canon quickly targeted potential customers such as secretaries from which they created a compact, desktop copier with full functions to serve different groups of customers. And Canon has successfully created new market space without being regulated.
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Blue ocean Strategy is a powerful framework that can help companies create new market spaces and achieve sustainable growth and profitability. By identifying and targeting unmet customer needs, companies can create new and uncompetitive market spaces and differentiate themselves from their competitors. . The Blue Ocean Strategy Model is a theoretical model that can illuminate the path of many managers. However, the model first describes what to do, not how to do it. Through the content of the article above, you also have a better understanding of this question. If you have any questions, please contact us immediately Johnson's Blog for support!