Blue Ocean Strategy

Competition mainly happens during saturated markets wherein a company competes for a market share. This fight is often called a red ocean, in which competitors are fighting out based on price, features, and incremental improvements. However, the situation is quite different from this, and businesses are always looking to get away from this kind of heavy competition and establish new market space. It is termed as Blue Ocean Strategy. Let’s discuss in this blog what Blue Ocean is Strategy, how it works, the advantages and disadvantages of Blue Ocean strategy, and why perhaps it might be a game-changer for businesses looking for innovation and growth.

How Does Blue Ocean Strategy Work?

Now that we know blue ocean strategy meaning, let's proceed to see how the Blue Ocean Strategy works. Blue Ocean Strategy works through differentiation and cost leadership. It involves the following.

• Value Innovation: It launches new products or services that contain unique value to the customer; different from anything the competition offers.
• Eliminates Reduce Raise Create (ERRC) Grid: Determining those factors in the industry that can be eliminated, reduced, raised, or newly created to redefine value.
• Strategic Canvas: Market landscape analysis is important in identifying possible differences.
• Four Actions Framework: Applying the ERRC grid to reshape market boundaries and craft a new, uncontested market space.

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How to Implement the Blue Ocean Strategy

After understanding what is blue ocean strategy, let’s explore how to implement it. Here is the 5-step process to use the Blue Ocean strategy.

1. Build a Blue Ocean team to get started.
2. Take a closer look at the current state of your company.
3. Find the hidden challenges that limit the current industry size and uncover the potential customers.
4. Develop alternative opportunities by reconstructing market boundaries systematically.
5. Conduct a rapid market test to determine the right move and implement the strategy.

Blue Ocean and Red Ocean Strategy

Before discussing the advantages and disadvantages of the blue ocean strategy, it is important to understand the contrast between the Blue Ocean and Red Ocean strategies.

Red Ocean Strategy: Companies compete in the existing industries in traditional markets, which is referred to as the "red oceans". Competition is great since they are all fighting for the same pool of customers. It leads to overcrowding of the market, as companies engage mainly on price, features or service quality. Industries eventually get saturated and hence the competition becomes intense over time. In the red ocean scenario, growth is limited, whereas companies often enter a trap of diminishing returns due to price wars and shrinking profit margins.

Blue Ocean Strategy: On the other hand, the Blue Ocean Strategy puts the challenge before businesses to come out from these crowded markets and explore new avenues that have never been explored. Instead of aiming for the same market, businesses create new demand in an uncontested market. What matters here is not outperforming competition but making it irrelevant. Hence, by providing exclusive value through innovation, businesses can create for themselves their "blue oceans," where growth opportunities abound and where competition is minimal.

Advantages of Blue Ocean Strategy

The following advantages of blue ocean strategy are given below. 

• Companies can use this strategy to find uncontested markets and avoid mature, saturated markets
• Using it, companies can overcome the challenges of constant competition and overcome traditional business models to expand their demand and profitability
• It helps organisations create new value for customers, expand their value, and increase their value.

Disadvantages of Blue Ocean Strategy

Most businesses can benefit from the blue ocean strategy. However, it has some disadvantages as well. Here are a few of them:

• It can be challenging for firms to identify the right blue ocean strategy.
• Due to the new market, help is needed to attract new customers. 
• The execution of a strategy can sometimes go wrong. 
• It takes patience and trust to get market share.
• As it is a new field, there is a high level of risk for companies. 

Conclusion
Blue Ocean Strategy creates new demand by creating new ways to differentiate from competitors rather than competing for limited market share. As a result, businesses can stay ahead by increasing their profitability and offering new value to customers. However, it's important to note that Blue Ocean Strategy implementation requires thorough market analysis. Moreover, it can be difficult to identify the right blue ocean strategy and attract new customers.  You can use a share market app for useful insights. Remember, you must understand what is the blue ocean strategy definition and how to implement it.