Blue Ocean Strategy

December 20, 2014

To understand the nature of Blue Ocean Strategy, we have to realize that
the business universe consists of two distinct kinds of space, which are the
red and blue oceans.
Red oceans represent all the industries in existence todaythe known
market space. In red oceans, industry boundaries are defined and accepted,
and the competitive rules of the game are well understood. Here, companies
try to outperform their rivals in order to grab a greater share of existing
demand. As the space gets more and more crowded, prospects for profits
and growth are reduced. Products turn into commodities, and increasing
competition turns the water bloody.
Blue oceans denote all the industries not in existence todaythe unknown
market space, untainted by competition. In blue oceans, demand is created
rather than fought over. There is ample opportunity for growth that is both
profitable and rapid. There are two ways to create blue oceans. In a few
cases, companies can give rise to completely new industries. But in most
cases, a blue ocean is created from within a red ocean when a company
alters the boundaries of an existing industry. In blue oceans, demand is
created rather than fought over. There is ample opportunity for growth that is
both profitable and rapid.

Thus, Blue ocean strategy provides a systematic approach to break out of

the red ocean of bloody competition and make the competition irrelevant by
reconstructing market boundaries to create a leap in value for both the
company and its buyers. Instead of competing in existing industries, blue
ocean strategy equips companies with frameworks and analytic tools to
create their own blue ocean of uncontested market space.
Blue Ocean Strategy requires a shift of attention from supply to demand,
from a focus on competing to a focus on value innovation that is, the
creation of innovative value to unlock new demand. This is achieved via the
simultaneous pursuit of differentiation and low-cost. As market structure is
changed by breaking the value/cost trade off, so are the rules of the game.
Competition in the old game is therefore rendered irrelevant. By expanding
the demand side of the economy new wealth is created. This strategy
therefore allows firms to largely play a nonzero-sum game, with high payoff
possibilities.
Key Features of Blue Ocean Strategy in new market development
Creating blue oceans builds brands. Basically, companies in blue oceans
are the pioneers and first movers in that certain market. Blue ocean strategic
move can create brand equity that lasts for decades, thereby continuing to
deliver high growth and profits over a sustained period.
Break the value/cost trade off. Perhaps the most important feature of
blue ocean strategy is that it rejects the fundamental tenet of conventional
strategy: that a trade-off exists between value and cost. Companies in a Blue
Ocean can either create greater value for customers at a higher cost or
create reasonable value at a lower cost. In other words, the strategy is
essentially a choice between differentiation and low cost. Most successful
companies in a blue ocean pursue differentiation and low cost
simultaneously.
Blue oceans are the engine of growth. Innovation, paired with
entrepreneurship, has always been the driver of the worlds whole economic
growth. Capturing new demand and creating an uncontested market space
based on that demand give birth to a whole new market or industry. In
contrast to red oceans, wherein companies focus more on the competition
and rivalry, this strategy focuses more on introducing new ideas, new
concepts, new products and services. Thus, blue ocean strategy make the
world categorically better or more advanced than it ever was before.