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Blue ocean strategy is a marketing strategy that creates uncontested market space by generating demand that was previously unheard of. It's about finding new ways to satisfy unmet needs. A blue ocean market provides opportunities for growth, reduces competition, and increases profits compared to traditional red ocean markets
What is “Blue Ocean Stategy"?
Blue Ocean Strategy is a strategy for developing and expanding a market in which there is no or little competition. Businesses that apply Blue Ocean Strategy need to find and pursue a new market that no other business has yet entered, or where competition is insignificant. Blue Ocean Strategy is the brainchild of professors Mauborgne and Kim from INSEAD (France) after many years of research.
Red Ocean Strategy &. Blue Ocean Strategy
Red Ocean Strategy and Blue Ocean Strategy are two terms used to describe two different approaches to business strategy and market competition.
Red Ocean strategy describes a market space that is already known, with many industries existing. In this strategy, businesses are required to have appropriate business strategies to outperform competitors, adhering to established principles. Red Ocean strategy with a large number of businesses competing leads to decreasing profits for businesses over time.
Blue Ocean strategy describes a market space that is unknown or very few businesses, industries existing. In the Blue Ocean market, businesses create demand rather than compete, with many opportunities and potential for strong growth, high profit margins.
Differences between Red Ocean and Blue Ocean strategies:
Red Ocean | Blue Ocean |
- Competing within existing market space - Beating competing rivals - Exploiting existing demand - Businesses must accept trade-offs between value, benefits provided, and costs incurred - Entire organization's activities are conducted and adjusted according to the chosen strategy: Implementing a strategy that is differentiated from competing rivals or implementing a low-cost strategy | - Creating a market space with no competing rivals - Making competition unnecessary, less impactful, or irrelevant - Creating and capturing new demand - Breaking the trade-off relationship between value provided and costs incurred - Adjusting the entire organization's activities to pursue both differentiation and low-cost strategies |
Characteristics of Blue Ocean Strategy
Blue Ocean Strategy is considered a survival strategy for businesses to open up opportunities for development and survival in the market. Developing according to Blue Ocean Strategy brings many benefits to businesses. Here are the main characteristics of Blue Ocean Strategy:
Not competing in existing markets, thanks to creating a market with no competition or low competition.
In Blue Ocean strategy, competition is unnecessary, and businesses will not compete with rivals.
Focusing on building and creating new needs for customers.
Not focusing on balancing value factors or costs but instead shifting towards breaking values/costs.
Blue Ocean Strategy will align all of the business's activities in pursuing differentiation or low-cost strategies.
Advantages and Disadvantages of the Blue Ocean Strategy
1. Advantages of the Blue Ocean Strategy
1.1. Market Avoids Saturation
By applying the Blue Ocean Strategy, your business's products will stand out from others while still meeting customer needs at affordable prices. Your business will not face competition from major players in your field.
1.2. Creating Growth Potential
Following the Blue Ocean market means your business can balance innovation of products or services with costs and benefits, creating new value for your customers. When more customers buy what you offer, word-of-mouth advertising can further increase demand for your products or services.
2. Disadvantages of the Blue Ocean Strategy
2.1. Overambitious
The logic behind the Blue Ocean Strategy implies that any business can create an affordable, non-competitive product or service. In reality, it's not always easy to achieve this innovation. Even if a business has a great idea, constraints in the real world can hinder turning it into reality.
2.2. High Risk
Perhaps a business has found a way to create a completely unique product without setting an unreasonable price. However, testing the product as well as testing it on the market involves high levels of risk.
2.3. Short-Term
Innovations bring many benefits to imitators, meaning that over time, Blue Ocean can easily turn into Red Ocean. Even if Blue Ocean strategy is ideal for your business at the moment, it may not be feasible in the long run.
Blue Ocean Strategy can bring benefits to your business, or it may inadvertently hinder your operations. Therefore, to decide on your business model, you should have a clear understanding of this strategy.
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