January 23, 2017

Blue Ocean strategy – Creating a niche of your own

Blue ocean strategy

The Blue Ocean Strategy represents a theory concerning the business strategy created by two professors namely W. Chan Kim and Renee Mauborgne.

The theory is pledging for the creation of a new market space, the blue ocean, as a main technique for the realization of a significant and profitable growth of the company. The theory is backed up by an innovation process and by various management tools which make possible the creation of different innovative strategic movements.

While the blue ocean represent the creation of a new market space, the red ocean illustrates the current market space, the metaphor referring actually to the bloody battle that most companies face nowadays in order to survive and remain competitive in the respective markets. Most of the times, these companies focus their strategies on competitiveness in order to gain a higher market share.

This approach represents the structuralistic part of the strategy which means that companies adapt their behavior/strategy according to the existing external conditions (the structure of the industry).

However, this is considered to be a limited approach. Due to globalization and its consequences such as the significant reduction of the production cost and the increased access to information, the concurrence is more and more intense in the majority of the industries, increasing the pressure and reducing the profit margins.

The blue oceans are the newly created market spaces by the companies as a result of various strategic decisions. The creation of a new market space provides the company with a position of natural monopoly which they can enjoy for a time.  This represents the reconstructivistic part of the strategy, meaning that companies can modify the boarder of the industries (which are often seen more as mental boarders).

However, the Blue Ocean Strategy does not encourage companies to behave in a monopolistic way as this might affect them on the long term.  Likewise, companies should determine their pricing strategy in a strategic manner in order to rapidly gain a high amount of customers and to create a significant competitive advantage for themselves.

The process of creating new market spaces in a structured and consistent way has as main purpose the maximization of opportunities and the minimization of the associated risks.  The process of formulating a Blue Ocean Strategy can be described as collaborative, visual, experimental as well as exploratory.  The reasoning behind this strategy focuses on analyzing firstly the current situation of the company together with the entire industry in which the company is operation and its relevant competitors. In this way, an exploratory study is starting to be conducted on how to reduce the costs as well as different ways for creating value for its customers.

This strategy can be applied by any kind of association/organization/company in any sector being either public, private or social.

Most of the times, this strategy has been founded in innovation of business models, as well as in innovation of products/services and innovation of consumers’ experiences.

The typical architecture of a Blue Ocean Strategy initiative has four steps, each one of them consisting in a series of workshops and “terrain work” for the validation of the already made assumptions and for the exploration of the consumer’s needs and expectancies. The results of this process consist in a new value proposition which will represent the foundation of a new business model innovation.

Related Posts:

About Hitesh Bhasin

I love writing about marketing and advertising. Would you like to ask me a question? Kindly send your queries and feedback via this Forum. You can also get daily marketing updates via email. Let's stay in touch :)

Speak Your Mind