When professors Renée Mauborgne and W. Chan Kim published Blue Ocean Strategy in 2005, it transformed the subject of business strategy. While strategy fads come and go, Mauborgne and Kim’s groundbreaking research remains highly relevant more than a decade after its initial publication. Mauborgne summarises an important aspect of his original theory in this brief vignette: how market-creating strategy differs from market-competing strategy.
What is Blue Ocean and Read Ocean Strategy?
Market strategy approachs businesses in one of two ways. Most businesses and governments pursue a market-competing “red ocean strategy,” which focuses on expanding market share in established sectors with intense competition, difficult investment to obtain, and narrow profitability. Market-creating firms, on the other hand, use a “blue ocean approach,” in which they create a “new area” that allows business to survive regardless of what is happening in the broader sector.
Companies that create markets let the established industry structure to define their strategy and do not challenge the status quo. As a result, red ocean enterprises waste their resources in an attempt to grab a larger share of existing client demand. Market-creating firms, on the other hand, use their tactics to shape their business environment. These blue ocean companies concentrate on creating wholly new demand, hence boosting the industry as a whole. The red ocean strategy addresses competition in one of two ways: sell at the lowest cost or be the most differentiated company in the industry. However, if you give a highly differentiated offering, your costs will be high and your product will be more expensive.
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Examples of Blue Ocean Strategy
The Nintendo Wii is an example of a blue ocean strategy. Once upon a time, video gaming was a highly competitive red ocean business with several firms competing for market share. However, Nintendo disrupted the business with the Wii, a unique device. Despite being manufactured in Japan and the United States, where labour expenses are high, the Wii is inexpensive. It appeals to new market sectors, such as old people and children who previously preferred sports to video games. Outdoor advertising was a “bloody red” industry with low profit margins. Advertisements limited to billboards constructed alongside roads and highways.
Then came JCDecaux, a French business that used a blue ocean strategy to dominate the industry. JCDecaux advertising can be found in bus stops, metro stations, and airports all around the world. It reshaped the market by improving the service and appearance of outdoor advertising.