Blue ocean strategy
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Blue Ocean Strategy: Creating Uncontested Market Space
Introduction to Blue Ocean Strategy
Blue Ocean Strategy (BOS) is a business approach that emphasizes creating new market spaces, or "blue oceans," rather than competing in existing industries, known as "red oceans." This strategy aims to make the competition irrelevant by innovating and offering unique value propositions that open up new demand .
Key Concepts of Blue Ocean Strategy
Uncontested Market Space
The core idea of BOS is to develop uncontested market space where competition is minimal or non-existent. This is achieved by redefining industry boundaries and creating new demand rather than fighting over existing customers . For instance, Cirque du Soleil revolutionized the circus industry by combining elements of theater and circus, creating a unique entertainment experience that attracted a new audience.
Value Innovation
Value innovation is the cornerstone of BOS. It involves breaking the trade-off between differentiation and low cost by simultaneously pursuing both. This is done through cognitive reconstruction of market elements across industry boundaries, leading to the creation of new value for both the company and its customers . Tools like the strategy canvas and the four actions framework help companies visualize and implement value innovation.
Strategic Moves and Frameworks
BOS emphasizes strategic moves over traditional units of analysis like company and industry. Strategic moves involve a set of managerial actions and decisions that create a major market-creating business offering. Frameworks such as the strategy canvas, four actions framework, and the eliminate-reduce-raise-create grid are instrumental in guiding companies to develop these strategic moves.
Practical Applications and Case Studies
Cirque du Soleil and the Circus Industry
Cirque du Soleil is a prime example of BOS in action. By reinventing the circus experience, Cirque du Soleil created a blue ocean that led to a 22-fold increase in revenue over ten years. This was achieved by combining elements of theater and circus, thus attracting a new audience and making traditional circus competition irrelevant.
U.S. Wine Industry
In the U.S. wine industry, a particular manufacturer applied the four actions framework to the strategy canvas, creating a wine with a strategic profile that broke away from the competition. This led to the creation of a blue ocean in the wine market, demonstrating the practical application of BOS tools.
Small and Medium Enterprises (SMEs)
Research indicates that BOS positively impacts the performance and growth of SMEs. By adopting BOS, SMEs can achieve sustainable growth and overcome market challenges by creating new, uncontested market spaces. This approach is particularly beneficial in high-growth economies like the UAE, where SMEs and multinational enterprises are implementing BOS to innovate and target non-customers.
Extending the Boundaries of Blue Ocean Strategy
Innovation Types
BOS can be extended through various types of innovation, including radical, disruptive, frugal, and purely differentiation strategies. These innovations help create blue oceans by offering unique value propositions that are not limited to value innovation alone.
Sustainable Competitive Advantage
While BOS focuses on creating new market spaces, it also contributes to building sustainable competitive advantages. By continuously innovating and redefining market boundaries, companies can maintain their competitive edge and achieve long-term profitability.
Conclusion
Blue Ocean Strategy offers a transformative approach to business by encouraging companies to create new market spaces and make the competition irrelevant. Through value innovation and strategic moves, companies can achieve rapid and profitable growth. The practical applications of BOS in various industries, from entertainment to wine, demonstrate its effectiveness in fostering innovation and sustainable growth. As market dynamics continue to evolve, BOS provides a robust framework for companies to navigate and thrive in uncontested market spaces.
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