Blue Ocean Strategy
Principles of Marketing
December 2, 2013
For a long time many businesses have use a military strategy in order to find profit in an existing market. Fighting for a competitive advantage and battling competitors over a piece of the profit. Taking this head-on approach only leads to an overcrowded market with a shrinking profit pool. This is what the book calls a “red ocean”. Blue Ocean on the other hand wants you to look outside the box and make the competition irrelevant. In the future companies will not succeed battling competitors, but instead finding uncontested market space ripe for growth. Swimming in an area that only has a few ...view middle of the document...
Combining these two ideas created a new market in the entertainment industry, and as a result they were able to successfully make a profit. Cirque du Soleil made a brilliant move in this industry. By blending opera and ballet with a circus format, and eliminating star performers and animals they expanding the demand of the economy they created new wealth.
Companies cannot completely break away from existing competition. That is not what this book is trying say. Instead, it is trying to get away from risk taking and minimize it. Using a guideline they call a “Strategy Canvas”, is simply using a framework to create a Blue Ocean Strategy. There is four steps to this framework eliminate, reduce, raise, and create. Using these steps will create a new value curve. Having a strategy canvas will give a company a clearer picture of your target market. When that is accomplished then you can target your business needs along with your capabilities, and what your competitors offer and manipulate the gaps you find. This will let you see how consumers see your product strengths and weaknesses compared to the competitors. This will let you know where to position your product in the market to get the most profit. The book gives the example of the wine industry in America. Studies showed that Americans would rather drink beer or mixed cocktails, because there thought of drinking wine was a turn-off. It was too complex for the average drinker so they wanted to make it fun and sociable. Making a sweater blend is how they created a new market.
Formulating Blue Ocean Strategy
In order for companies to have success in the future they must reconstruct their market boundaries, and find a way to create a Blue Ocean. In this section of the book it talks about six simple and effective principles that will create and capture a Blue Ocean.
1) Look Across Alternative Industries- Ask yourself what the alternatives to your product are, and why do buyers buy them.
2) Look across Strategic Groups within Your Industries- Simply figure out the strategic groups of your industries, and figure out why buyers pay more or pay less for a product.
3) Look Across the Chain of Buyers-find out what buyers group your industries choose from and if you shifted the buyer will you create new value.
4) Look across Complementary Products and Services Offerings-find out the context in which your product is used, and how the buyer feels before, during, and after they buy your product.
5) Look across Functional or Emotional Appeal to buyers-Does your products have functionality or emotional appeal, and what you can do to have both.
6) Look across Time-What trends would impact your product. If negatively could your company bounce back from it?
Using this six path framework will give your company insight of creating new market share, and a better understanding about your product or service.
Focus on the Big Picture and Not the Numbers
Strategies used today are very...