Blue Ocean Strategy

Definition

Blue Ocean Strategy refers to a business approach that focuses on creating new market space, or 'blue oceans,' rather than competing in existing industries filled with rivals, or 'red oceans.' This strategy emphasizes innovation and value creation to make the competition irrelevant by identifying untapped market potential and offering unique products or services.

5 Must Know Facts For Your Next Test

1. Blue Ocean Strategy encourages businesses to innovate rather than compete, focusing on creating demand in an uncontested market space.
2. This strategy promotes shifting focus from existing customers to non-customers to discover new opportunities for growth.
3. Key tools include the 'Four Actions Framework' which helps to eliminate and reduce factors that an industry competes on, while raising and creating new factors.
4. Successful examples of Blue Ocean Strategy include Cirque du Soleil, which combined circus arts with theater to create a unique entertainment experience.
5. The goal of Blue Ocean Strategy is not just to outperform rivals, but to create and capture new demand, making competition irrelevant.

Review Questions

• How does Blue Ocean Strategy differ from traditional competitive strategies in terms of market focus?
  • Blue Ocean Strategy differs from traditional competitive strategies by shifting the focus from competing in crowded markets to creating new, uncontested markets. While traditional strategies often involve beating competitors through price wars or improved features, Blue Ocean Strategy emphasizes innovation and the creation of unique value propositions that meet untapped customer needs. This approach encourages businesses to look beyond current competition and explore new market spaces where they can thrive without direct rivalry.
• What role does Value Innovation play in implementing a successful Blue Ocean Strategy?
  • Value Innovation is central to implementing a successful Blue Ocean Strategy as it combines differentiation with low cost, allowing companies to provide superior value to customers while reducing costs. This concept drives the creation of new market spaces by focusing on what customers truly value and delivering that in a way that has not been done before. By effectively aligning innovation with utility, price, and cost positions, organizations can create unique offerings that redefine industry boundaries and attract new customers.
• Evaluate how Blue Ocean Strategy can impact opportunity assessment when developing new business ventures.
  • Blue Ocean Strategy significantly impacts opportunity assessment by encouraging entrepreneurs and businesses to seek out untapped markets rather than relying solely on conventional market research methods. By focusing on non-customers and exploring unmet needs, businesses can uncover innovative opportunities that may not be evident through traditional assessments. This proactive approach allows for a broader understanding of potential markets, enabling companies to position themselves uniquely against competitors and discover opportunities for sustainable growth in new spaces.

Related terms

Value Innovation: Value Innovation is the cornerstone of Blue Ocean Strategy, where companies create leap in value for both buyers and themselves, thereby opening up new and uncontested market space.

Competitive Advantage: Competitive Advantage is the edge that a company has over its competitors, which can be achieved through factors like cost leadership or differentiation; however, Blue Ocean Strategy seeks to transcend traditional competitive advantages by focusing on new markets.

Market Segmentation: Market Segmentation involves dividing a broad target market into subsets of consumers with common needs or characteristics, which can help identify new opportunities for blue ocean strategies by uncovering overlooked segments.