BLUE OCEAN STRATEGY

BLUE OCEAN STRATEGY

Blue Ocean Strategy is a buzzword quite prevalent among the corporate circles in various organizations. The evolution of this term is infact from a book published in 2005 and written by W. Chan Kim and Renee Mauborgne, Professors at INSEAD and Co-Directors of the INSEAD Blue Ocean Strategy Institute. The entire book is based on a research and study of 150 companies and their strategic decisions to face the competitive environment. The findings of the study lays down a success strategy that companies should create their own market space instead of fighting out with competitors to gain market share.

To understand the blue-oceaned market space, let us first understand the meaning of ocean. The entire market universe is divided into red and blue oceans (metaphors).

Red Ocean

Red oceans define an existing market space with well-defined boundaries. The rules of the competition are known to all and the companies fight really tough to gain a higher market share by outperforming others. The higher the number of competitors, the lower is the share of market and profits. This makes the market space blood red with cut-throat competition and hence the term ‘Red Ocean’.

Blue Ocean

Blue Oceans widely denote the non-existent industry and an unexplored market space. Blue Ocean is an analogy to describe an industry untainted by competition and an opportunity to grow rapidly as well as profitably.

The concept which is most widely discussed within the blue ocean strategy is the concept of ‘Value Innovation’. It comes with an aim to make competition irrelevant by having a fresh strategic move to raise and create value for the market along with elimination of less valued features or services. It tries to create product differentiation as well as achieve lower costs and hence create an uncontested market space in order to achieve a sustainable competitive advantage.

An example of Blue Ocean Strategy

A good example of a Blue Ocean Strategy is Apple’s iTunes. Apple not only entered digital music space by – and signalled the end of the previous inn cutting edge gadgets but also became a distributor by creating iTunes, an online service where people could download high quality songs for a very reasonable price.

With the technology available to digitally download music free instead of paying for a CD, the trend toward digital music was clear. Apple launched its own online music store, a concept which was unique as well as affordable. No wonder, that for a long period of time, Apple was in Blue Ocean without any competition whatsoever.