Blue Ocean Strategy
Introduction
The Blue Ocean Strategy is based upon the view that the only way to beat the competition and take a leading position on the market is to cease to battle with the competition on the existing market and to revert to new, free markets. In that sense Red Ocean represents a familiar, present market where the rules of trading are set and where the majority of the companies attempt to attain a greater portion of the already defined industry. The relentless competition of Blue Ocean free market is transformed into bloody red.

Blue Ocean represents a still unexploited market where the competition is irrelevant, since the basic rules of the market are still not set. Based upon the study of 150 strategic shifts that occurred in the last hundred years and observing thirty industries, Blue Ocean Strategy enables a practical and systematical approach of strategic shifts towards new markets.

According to the authors’ theory, competition in industries with too many competitors does not lead to above average profits, and as a strategic guidance, suggest research and discovery of new markets that have not yet been conquered by the competition. Naturally “The Blue Ocean Strategy” regards the competition as all other strategic theories do; however, they criticize structural approach because being oriented towards the competition and the competitive advantages in the present markets the management often drifts away from strategically investigating for new markets. After the discovery and development of new markets, the strategy should be directed towards its usage, as well as, its’ protection from other possible competitors, since new markets ensure quicker and above average proceeds.

There are two ways in which to create Blue Ocean, which is to set a foundation for the “Blue Ocean” strategy and establish valuable innovations:

  • Set up a completely new industry.
  • Within the existing market create a new market in the way to adjust and extend the borders of the industries, for example, applying experience instead of new technologies.  The authors stress the Della example who put out the order for computers according to the users specifications without the alterations of the technological production.

We examine “Blue Ocean” as a segment of the market where the activities of the company, in a reasonable and not too difficult method, affect the structure of expenses and the value that is being offered to the buyers.  Lower costs are achieved by eliminating and reducing factors in which the industry is competing.  The new value for the buyers is created by offering elements that have never been offered.  During time, expenses are additionally reduced when a new value is recognized on the market and when we proceed towards economic greatness.

RED OCEAN STRATEGY

Compete in existing market space

Beat the competition

Focus on existing customers

Exploit existing demand

Make the value-cost tradeoff
(create greater value to customers at a higher cost or create reasonable value at a lower cost)

Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost

BLUE OCEAN STRATEGY

Create uncontested market space

Make the competition irrelevant

Focus on non-customers

Create and capture new demand

Break the value-cost tradeoff
(Seek greater value to customers and low cost simultaneously)

 

Align the whole system of a firm’s activities in pursuit of differentiation and low cost.

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