Introduction to Blue Ocean Strategy
Blue ocean strategy refers to transitioning from the traditional approach of competition to creating innovative markets. It focuses on value creation and innovation to attract a higher customer base and sustainably achieve growth. This also means doing business without any competition involved. There is the creation of demand, which involves fewer competitors. Strategic thinking with the creation of industries and innovative markets. It focuses on the existing space of the market and produces results in an effective way to break from the competition. Moreover, there is involvement of market saturation and profit margins with limited opportunity of growth.
Overview of Red Ocean strategy
Generally, the red ocean strategy refers to a great marketplace where there is a market share with enhanced competition rules and fierce competition. There is competition to outperform the offerings and lower the prices. It is complicated for companies to find growth if there are many customers involved (Young, 2022). With the help of innovation, it leads to the enhancement of existing services and products. Especially in the red ocean strategy, the decisions are based on both price engagement and profit margins. With the increase in market saturation and market competition, consequently, there is a constant battle among the market shares which affects profitability.
Blue Ocean strategy vs Red ocean strategy
Benefits of opting for blue ocean strategies
Creates innovative demand
The Blue ocean provides an absence of competition. The companies particularly Oceanoffer new, unique demands and alarms, more opportunities for growth with less pressure in the competition. By creating new demands, it attracts companies in a broader range (Samrin, 2017). Also, there is significant growth with the expansion of the market. In addition, it drives every business with innovation.
Reduce in competitive pressure
The Company eliminates the intense pressure of competition such as red oceans. Consequently, the pressure leads to bars and market saturation. So, the companies opting for the red ocean strategy focus on creating value rather than being in competitive pressure. Moreover, it provides freedom to think innovatively in a broader aspect and enhances the industry standards.
Improved brand equity
With the creation of the blue ocean, it resulted in the redefinition of the standards of the market. This significantly enhances the brand equity of the company and makes it an innovator in the market. Moreover, it fosters the brand loyalty and enhances the brand equity. It resonates with the customers at a high level and builds innovation with unique value proportions and premium pricing. This also gains a customer base with profitability in the longer term and enhances market leadership.
More profit margins
The blue ocean strategies lead to margins at a higher level. It offers the companies both unique value propositions and lowers the cost (Sakinah, Zahro, & Andinia, 2023). The companies engage and benefit in the revenue stream with both high pricing and operate streamlined operations with reduced cost. Moreover, it offers financial performance at a greater stability and good financial maintenance.
Encourages innovation
By entering the new market space, businesses increases their creativity by thinking outside the box and develop products with innovative techniques (Singh, 2014). Subsequently, it develops enhanced and forward thinking. This also leads to improvement and enhancement in employee engagement by creating greater opportunities of growth. Moreover, it explodes new opportunities and understands the customer preferences for long-term success.
Blue ocean strategy framework
Case studies of blue ocean strategy
Netflix
For example, Netflix used to have many DVDs. It did not produce the movies, but it has created an opportunity to watch them with the digital system. This is an application of blue ocean strategy where there is less competition to it.
Uber
The company Uber did not take a chance to compete with the owners of taxis, instead it has planned to create an application for the users. Also, made the application to be usable for customers and drivers to connect in seconds.
Airbnb
The company Airbnb has changed the strategy of travelling. It has created a platform for booking an accommodation for the users and made it easy for them.
Southwest airlines
It has opted for a strategy of blue ocean with cost-effective management. Avoided unnecessary services and provided low fares to attract the low-budget travelers. Moreover, it achieves a greater profitability with attainment of a greater customer base in this highly competitive industry.
Cons of Blue Ocean strategy
With the help of the blue ocean strategy, particularly there is a high initial investment. There is complexity in predicting the behavior of the customer (Freedman, 2024). With the introduction of a new product, it requires new solutions to adopt new approaches. Customers find it difficult to switch to adapt to the operations. With the introduction of a new product, the market acceptance is difficult. Hence, it requires more education and complexity to understand the new benefits and value proportions. It is a challenging process to engage the customers with offering incentives. For successful implementation of organizational challenges, the company faces a lack of expertise in the new market. There is difficulty in integrating the process and systems without proper execution. There are also risks associated with quality and reliability to meet the expectations of the customer.
Conclusion
The Blue Ocean strategy has become an innovative and transformative approach in the field of business. To break the barriers in the traditional competitive market, accordingly, it brings up innovative solutions to the market space. It creates innovation and unlocks growth opportunities to enhance the brand equity of any company. Companies such as Uber, Netflix, and Airbnb have demonstrated the blue ocean strategies and developed the companies. The strategy also reduces the pressure of competitiveness in the market and fear of offerings. In addition, it boosts brand equity and enhances customer loyalty by attracting customers in various industries. In conclusion, despite the challenges, it provides resistance to the new change and succeeds in the modern business environment.
References
Freedman, M. (2024, Sep 05). Blue Ocean Strategy: Creating Your Own Market. Retrieved from Businessnewsdaily: https://www.businessnewsdaily.com/5647-blue-ocean-strategy.html
Sakinah, I., Zahro, Z., & Andinia, A. (2023). Adaptation of Blue Ocean Strategy in Increasing Business Markets. Journal of Economics Business Industry, 1(2), 81-91. Retrieved from https://www.researchgate.net/publication/377226773_Adaptation_of_Blue_Ocean_Strategy_in_Increasing_Business_Markets
Samrin. (2017). THE FORMULATION OF BLUE OCEAN STRATEGY FOR SMALL AND MEDIUM INDUSTRY IN TANJUNG BALAI CITY NORTH SUMATERA- INDONESIA. International Journal of Economics, Commerce and Management, 5(12), 956-979. Retrieved from https://ijecm.co.uk/wp-content/uploads/2017/12/51253.pdf
Singh, A. (2014). The Evolution of Blue Ocean Strategy: The Ideas That Shaped a. VIVECHAN International Journal of Research, 5(1), 69-80. Retrieved from https://scispace.com/pdf/the-evolution-of-blue-ocean-strategy-the-ideas-that-shaped-a-39llp64ipb.pdf
Young, J. (2022, Jun 30). What Is Blue Ocean? Definition in Markets and Characteristics. Retrieved from Investopedia: https://www.investopedia.com/terms/b/blue_ocean.asp
Keywords
Market competition, Blue ocean strategy, Innovative demand, Red ocean strategy, Market leadership
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