Blue Ocean Strategy

Definition

Blue Ocean Strategy is a strategic management approach that focuses on creating new, uncontested market spaces rather than competing head-to-head in existing, crowded markets. It emphasizes the importance of differentiating a company's offerings and expanding the overall demand for a product or service, rather than fighting for a share of an existing demand.

5 Must Know Facts For Your Next Test

1. Blue Ocean Strategy focuses on making the competition irrelevant by creating new market space rather than competing in existing, crowded markets.
2. The key objective of Blue Ocean Strategy is to maximize value for both the company and its customers, rather than just trying to outperform rivals.
3. Blue Ocean Strategy emphasizes the importance of value innovation, which involves simultaneously pursuing differentiation and low cost to create new demand.
4. The Strategic Canvas is a tool used in Blue Ocean Strategy to analyze the current state of the industry and identify opportunities for creating new value.
5. Blue Ocean Strategy encourages companies to look beyond their existing industry boundaries and explore new ways of doing business to unlock new sources of demand.

Review Questions

• Explain how Blue Ocean Strategy differs from the traditional Red Ocean Strategy approach.
  • Blue Ocean Strategy differs from the traditional Red Ocean Strategy in its focus on creating new, uncontested market spaces rather than competing head-to-head in existing, crowded markets. While Red Ocean Strategy emphasizes outperforming rivals and grabbing a larger share of existing demand, Blue Ocean Strategy focuses on making the competition irrelevant by simultaneously pursuing differentiation and low cost to unlock new sources of demand. The key objective of Blue Ocean Strategy is to maximize value for both the company and its customers, rather than just trying to outperform rivals.
• Describe the role of value innovation in Blue Ocean Strategy and how it can lead to the creation of new market space.
  • Value innovation is the cornerstone of Blue Ocean Strategy. It involves simultaneously pursuing differentiation and low cost to create new value for both the company and its customers. By focusing on value innovation, companies can break away from the competition and create new market space that is uncontested. This allows them to expand the overall demand for their products or services, rather than fighting for a share of an existing demand. Value innovation is a key driver in the creation of blue oceans, as it enables companies to unlock new sources of demand and make the competition irrelevant.
• Analyze how the Strategic Canvas can be used as a tool to identify opportunities for creating new value in the context of Blue Ocean Strategy.
  • The Strategic Canvas is a diagnostic and action framework used in Blue Ocean Strategy to visualize the current state of the industry and identify opportunities for creating new value. By mapping the key factors that customers consider when choosing between competing offerings, the Strategic Canvas allows companies to understand the existing value curve in the industry. This, in turn, helps them identify areas where they can differentiate their offerings and create new value that is not currently being addressed by competitors. The Strategic Canvas enables companies to break away from the competition and explore new ways of doing business, ultimately leading to the creation of blue oceans and the unlocking of new sources of demand.

Related terms

Red Ocean Strategy: Red Ocean Strategy is the traditional approach to business, where companies compete in existing market spaces, trying to outperform their rivals and grab a larger share of the existing demand.

Value Innovation: Value Innovation is the cornerstone of Blue Ocean Strategy, where companies aim to create value for both the company and its customers by simultaneously pursuing differentiation and low cost.

Strategic Canvas: The Strategic Canvas is a diagnostic and action framework used in Blue Ocean Strategy to visualize the current state of the industry and identify opportunities for creating new value.