Kim and Mauborgne presented the blue ocean strategy as an alternative to the existing ones that all focus on industries and markets that are already occupied and overcrowded. As an example, the authors use the experience of Cirque du Soleil, a circus that has become much more than simple entertainment for children. Cirque managed to become as profitable and popular as it is because it “reinvented” the industry, stepped out of the market to create a new one. According to the authors, there are two kinds of space in all industries – a red ocean and a blue ocean. The red ocean symbolizes all industries that are known with their specific sets of rules, boundaries, and competitive games. The blue ocean, however, is a completely different area – it is an unknown market, a market, where no rivals are present because it has not been invented yet. While companies try to outperform each other in the read ocean, those who choose the blue ocean are to create demands and not to follow them. Moreover, sometimes companies can create entirely new industries (e.g. eBay and online selling).
Although the blue ocean strategy seems to be profitable and efficient, it does not attract as many companies as one could expect. This can be explained by the fact that red oceans are still more familiar to companies with their rules and limitations. However, blue oceans imply that the company will create a business in a market area where any rivals are absent. Blue oceans are not necessarily connected to technology innovation; incumbents can create blue oceans and often do it in their core industry. When analyzing blue oceans, companies, and industries should not be regarded as units. Blue oceans are created with strategic moves – actions and strategies that were not engaged or used before. Therefore, a company might not be successful at first, but it still has the potential to become a core player in this blue ocean in the future.
Several strategic implications can create blue oceans. Rejecting the fundamental strategy is one of them. To create a blue ocean, a company needs to invent a new approach towards the existing service, just as Cirque du Soleil did with the circus industry that had been in stagnation long before Cirque was created. While some of the core features in the circus industry were not popular anymore, the essentials remained and were the cause of Cirque’s success. Thus, the blue ocean strategy implies that a company will approach the industry or business critically and thoroughly. What is more, a combination of different elements from multiple industries can also attract customers and ensure that the company will not have to fight for the audience in a red ocean. Elimination of the factors that will make the company compete with others is capable of reducing costs. In the meantime, new and unseen elements in the industry will lift the buyer’s value.
It should also be noted that it is not easy to imitate a blue ocean strategy that is already in progress. As blue oceans lead to an emergence of economies of scale, it puts imitators back because of the cost disadvantage that they will experience. Moreover, an industry that became a blue ocean can attract customers that will refuse to choose any other provider of the same service (e.g. eBay). At last, blue oceans’ companies can have a distinct brand image that does not apply to core players in the same industry because they have a different agenda (the Body Shop – L’Oréal).
Critical Analysis: Evaluation
No matter how attractive the blue ocean strategy might seem, it is not suitable for every company and business. Moreover, it can be extremely risky. First, although a product or technology that a company provides may be unique, it does not mean it will create a blue ocean and bring revenues. Other companies that offer similar products can exist but be unknown to you. Your product might be unique but will not attract customers because the demand for it is scarce.
The input of mega-corporations and those with serious capitals should not be underrated as well. It is possible that while you are developing an idea, a startup to create the same product is set by Google or Apple. Thus, since these corporations have a much bigger audience and are generally more reliable, there is a big chance that your product will not succeed, even if it does create a blue ocean.
The author’s remark about the inability of other companies to copy the blue ocean strategy also remains doubtful. If we look at the market, we can observe that even the most fruitful and innovative products can be copied: iPhones, Google Glasses, electric cars, etc. For example, Tesla Motors was not the first company that provided electric vehicles. Nevertheless, it is one of the most prominent and successful manufacturers of eCars that both provide premium products and generates great revenues.
However, it should be noted that blue ocean strategy can be supported by several examples. Google Search was the first search engine in the world. Although it was copied extremely often, it remains to be the most popular search engine among others. Thus, if innovation is developed according to the customers’ demands and technological progress, it has the potential to remain the core player in the blue ocean it has created.
I perceive the blue ocean strategy as a perfect tool for self-assessment because it can help you understand whether your idea is as efficient and profitable as you expect it to be. Of course, one can only test the product when it is launched, but this strategy can indicate whether there should be any launch at all. Moreover, the blue ocean strategy can also help entrepreneurs and business newcomers feel more confident if they are to present an entirely new idea. The blue ocean strategy is newcomer-friendly, which is one of its main strengths.
Main Takeaways
The blue ocean strategy implies that it is possible to create an industry instead of competing in a one that is already overcrowded. This strategy can stimulate the creation of new industries that will provide markets yet unknown to customers and manufacturers. Moreover, it can help create a new brand that will be worthwhile and innovative at the same time. It is reasonable to assume that there are plenty of unrecognized markets and customers (see the number of new startups that grows day by day); therefore, new demands are generated hourly, and it is possible to fit into these demands if the blue ocean strategy is understood and implemented correctly. If industries seem too competitive, one should always consider creating a new one and developing it, even if initial investments are small.
References
Kim, W. C., & Mauborgne, R. (2004). Blue ocean strategy. Harvard Business Review, 87(2), 71-80.