Blue Ocean Strategy

3) Blue Ocean Strategy

Definition

The Blue Ocean Strategy framework is presented by Kim W.Chan and Mauborgne Renee in their most sellable book entitled “Blue Ocean Strategy- How to Create Uncontested Market Space and Make the Competition Irrelevant" which is first published in year 2005. Basically, Blue Ocean Strategy is a way to make the competition irrelevant by creating a leap in value for both the company and its customers.  The principle behind Blue Ocean Strategy is that all markets can be divided into red oceans and blue oceas.

Red ocean represents all industry in existence today which also known as market space. The competitve rules are known in red ocean. Companies try to compete with their rivals in order to get a grater share of existing demand. Thus, when the market space for ocean increses, the profits and growth will reduces as their products will become commodities.

For Blue Ocean, it denote all the industries not in existence today and also known as market space. Blue Ocean strategy creates uncontested market space because the rules are waiting to be set. In this blue ocean, the competition is irrelevant due to unexplored market. Company will create and capture new demand, break the value-cost tradeoff and ample opportunity for rapid growth in terms of profitability.

Methodology

Four Action frameworks are used in order to help manager reconstruct the buyer value elements into a new value curve that breaks the low cost trade-off. The four actions include:

i. Eliminate: Which of the factors that the industry takes for granted should be eliminated.

ii. Reduce: Which factors should be reduced well below the industry’s standard?

iii. Raise: Which factors should be raised well above the industry’s standard?

iv. Create: Which factors should be created that the industry has never offered?

The principles of Blue Ocean Strategy are the six main principles that can guide the companies through the formulation and execution of their Blue...