What is Blue Ocean Strategies?

All businesses have one goal: Profitability. However, the term profitability is comprehensive. It includes numerous factors that are to be taken care of by the businesses to ensure they are profitable in the long run. You must have seen numerous profitable businesses and a household name at one time that does not exist currently. This happens daily when businesses that fail to sustain themselves are forced to shut down. Even with good management and passionate employees, it becomes impossible to run the business further.

Among numerous reasons behind the failure, competition contributes the highest. Think of any type of business you want to start. After analyzing the sector, you will understand that numerous successful businesses running in the same sector have captured the customers. These customers use their products and services daily and are willing to pay for them. For every new business, the most pressing issue is to tackle the competitors and run the business in a way that they can pull the customers towards their products and services. If they fail in securing sales, the business fails too and is forced to shut down.

But what if there was another way to ensure profitability without having to glide through the never-ending competition? The method called Blue Ocean Strategy is used by almost all of the market leaders such as Amazon, Apple, Reliance, Tata Group, etc., to ensure they remain sustainable and don’t have to bow down to the competition.

What is the Blue Ocean Strategy?

Imagine a marketplace that currently does not exist. The potential customers do not know that they need a particular set of products and services but are willing to pay for them if they are presented to them. This is what a Blue Ocean Strategy is all about. A Blue Ocean Strategy suggests that a business should enter an unexplored and untapped market segment instead of fighting for a share in a segment with numerous successful companies. The logic behind the Blue Ocean Strategy is to make competition irrelevant as the market segment doesn’t exist before a business creates it through its products and services. Since market boundaries are not defined through the use of the Blue Ocean Strategy, they can be reconfigured by new ideas for businesses.

The idea of the Blue Ocean Strategy was first introduced by INSEAD professors W. Chan Kim and Renée Mauborgne in their book of the same name. They argued that if businesses innovate, they can create new products and services for a market segment that is non-existent and untapped. This will result in the creation of new demand and make the current competition irrelevant until new businesses enter the created market segment.

How does the Blue Ocean strategy work?

The Blue Ocean Strategy aims to ensure profitability by decreasing the competition to zero. The strategy believes that the best way a business can ensure long-term sustainability is by having no competitors in the market. However, as it is almost impossible to have no competitors in the present market sector, the Blue Ocean Strategy proposes that companies discover and invent an entirely new market segment that no one thought was possible until now.

For example, let’s say you own a shop for fashion accessories. In your area, numerous other shops sell the same products. Here, you are fighting for market share as you want the customers to come to your shop and not visit the others. Although the quality of the products may be the same, the market share you are getting may not be sustainable for the business. If this goes on for long, you may have to shut down your shop. However, you implement the learnings of the Blue Ocean Strategy and decide to create a new market segment.

You take pictures of all the accessories and create a social media page where people around you can see the accessories and buy them instantly and pay online. In turn, you deliver the products to their home. By doing this, you created a whole new market segment where people can browse and buy accessories online already knowing about the quality. The use of the Blue Ocean Strategy attracted customers who did not want to visit the shops but had to because of the unavailability of home delivery.

This is the most basic idea of the Blue Ocean Strategy that you cut out your competition and evolve to create new demand and customers.

What are the benefits of incorporating the Blue Ocean Strategy?

The Blue Ocean Strategy is immensely beneficial for a business to navigate through the business cycle successfully. It allows for better business opportunities and added profits. Here are the benefits of incorporating the Blue Ocean Strategy into the business.

• New Markets: The Blue Ocean Strategy ensures that the business and the current market segment make efforts to find a new untapped market and develop products and services to cater to the new customers. It allows businesses to enter an entirely new market, giving them added opportunities.

• Less Competition: The main cause of businesses shutting down is pressing competition. The Blue Ocean Strategy allows incorporating methods and techniques to identify an untapped market and enter it with required products and services. As the market didn’t exist before the identification, there are no companies present. This allows the new company to be the market leader automatically and have an opportunity to cater to almost every customer present.

• Monopolistic Opportunity: As the Blue Ocean Strategy allows to enter a market that has no competition, it is entirely up to the company that is entering to serve the customers with what they need. This provides a great opportunity for the company to be a monopoly in the market and garner 100% of the initial market capitalization in the specific market segment.

• Added Profitability: More customers means more profits. The Blue Ocean Strategy ensures that the company entering the new market segment has a host of customers to sustain the business. If the company caters to their needs successfully, it can ensure steady and recurring profits that the company can expand further and add new customers over time.

• Increased Goodwill: Goodwill is one of the most important things for a business to ensure expansion and improved business. With a new market segment, the company can cater to new customers, making the company name more visible and identifiable among the target audience. Along with better profits, the Blue Ocean Strategy techniques allow for increased goodwill that can also help in garnering more market capitalization in the previous market segments.

• Sustainability: The end goal of the Blue Ocean Strategy is to establish long-term sustainability for the business. This is where the company keeps on expanding to new territories with better profits and new customers. By using the Blue Ocean Strategy, a company can enter new markets and increase profits and have new customers to sell the products and services.

The Blue Ocean Strategy is used by almost all market leaders today. All big companies started from a market segment that had numerous other players. However, if they have restricted themselves to that market segment only, you wouldn’t be using their products or services currently. These companies saw the competition and knew that they wouldn’t be able to sustain for long if they kept fighting for a market share in the present market segment. Hence, they used the Blue Ocean Strategy to understand the market factors and identified untapped market segments such as e-commerce, online gaming, etc.

Once the market segment is identified, the company can move ahead in catering to the new customers. However, business success is not inevitable using the Blue Ocean Strategy. Even after a company is given no competition and new customers, it is entirely up to the company to develop products and services that are best in quality and cater to customers’ needs. Furthermore, there is no restriction on entering the newly identified market segment, ensuring that new companies will enter the market to fight for a market share. If the company that identified the market is not good enough, it can fail over time.