What is a Blue Ocean Strategy?

A Blue Ocean Strategy is the name of the optimal Strategy to follow in New Markets.

  • The concept was invented by W. Chan Kim and Renée Mauborgne in 2004.

 

The name Blue Ocean is a Metaphor for a sea where fishes don’t need to eat each other to survive.

  • The color of the Ocean is blue, due to the pure color of its water.

 

Blue Ocean Markets are Characterized for:

  • Little or no Competitors.
  • New Products or Services not yet fully Defined.
  • Uncertainty (often) about the Size that the Market can reach and its Future.

Therefore, a Company can grow without worrying too much about Competitors.

What Strategy to follow in a Blue Ocean

According to our Professional Experience, Blue Ocean Strategies should be based on:

 

Flexible Suppliers: Suppliers that can Adapt to Changes.

  • Since the Market is New, you don’t know what to expect in the future.

 

Study the New Players: Be aware of their Products and Market Approaches.

  • Learn from them: You never know if they will tackle the Market Better than you.

 

Focus on your Product: Substitute Products are not yet a Threat.

  • Your Product is likely to have a long “life expectancy” ahead of it.

 

Comfortable Relationship with Clients: For you. Don’t push yourself too hard.

  • The Market is young. You can establish the Benchmark you want.

 

Competition: Grow Faster than them to become the Market Leader.

  • In the future, you will be the Big Fish and you will be able to buy your Competitors.

 

* We have followed Porter’s 5 Forces to design the Strategic Key Points..

Blue Ocean Strategy

 

Before we see some examples, we’ll analyze the difference between Blue Ocean and  Red Ocean Strategies:

Blue Ocean vs Red Ocean Strategies

 

As you can imagine, a Red Ocean is the Opposite of a Blue Ocean  Market.

 

Red Ocean Markets are Characterized for:

  • Having Lots of Competitors or a Fierce Competition.
  • Well established Products that Clients know.

 

A Red Ocean Strategy differs completely from that required for a Blue Ocean.

The best way to understand Blue Ocean Strategies and How to design them correctly is by sharing some examples with you:

Blue Ocean Strategy examples

We’ll now share 4 examples of famous Companies that were Successful in Blue Oceans.

  • We’ll analyze what they did Right and what we can Learn from them.

 

Let’s begin:

Windows - Blue Ocean Strategy example

 

When the first Computers appeared, they did not have Operating Systems (OS).

  • Or at least, not as we know them today.

 

The interface that each Computer had was particular to its Brand.

  • There was not a common Operating System.
    • Different Computer companies had different Systems.

 

Everybody was Focusing on developing the best Hardware

…. And two young men Focused on developing a Common OS for all Computers.

 

Those guys were Bill Gates and Paul Allen. And their program, MSDOS.

  • The “father” of Windows.

 

What did Microsoft do?

  • Microsoft created a New Market: the Operating System Market.

 

In fact, they Grew so Fast and so Strongly that they are still the King of Operating Systems.

  • By far.

 

At first, they did not worry about other Companies or Products.

  • They mainly Focused on Growing Fast: MS-DOS in every Computer.

 

Over the years, as Windows became the King of the Market, they could buy all the Competitors they wanted.

Tesla - Blue Ocean Strategy example

 

In 2003,  Martin Eberhard and Marc Tarpenning (Tesla founders) maybe thought:

There is a good chance that in the future, cars become Electric…

… And nobody is manufacturing Electric Vehicles… What an Opportunity!“.

 

The rest is well known:

  • Elon Musk became the CEO and the Company soared.

With lots of troubles, financial problems, etc.

 

What did Tesla do?

  • They created the Market for Electric Vehicles.

Before them, no one thought that the technology was ready for it.

 

You can argue about:

  • Tesla’s financial situation.
  • Its Market Value.
  • Sales Forecast.
  • etc.

 

But, you can’t argue that thanks to Tesla, all Car Companies have started investing in the Electric Vehicle.

  • Tesla has played a huge Role in the Electrification of our cars.

 

The problem for Tesla is the Future.

  • Now, all car companies are investing heavily in Electric Vehicles.

The Blue Ocean is becoming Red.

 

Can Tesla grow so fast that not even Ford or Volkswagen can become a threat?

  • Only time will tell.

Netflix - Blue Ocean Strategy example

 

In the age of High-Speed Internet, Netflix came up with a very good idea:

  • A Platform where people could see whatever they wanted whenever they wanted.

 

We say high-speed internet because in the past, other companies tried to create something similar.

  • The problem was that the average Internet connection was very slow.

If you are young, you cannot imagine what it is like to wait 2 hours for a single song to download.

 

Also, in the past, there were dozens of illegal platforms where people could easily download everything they wanted for free.

  • And copyright laws hadn’t started to prosecute those platforms.
    • Kazaa.
    • Ares.
    • eMule.
    • etc.

 

Anyway.

What did Netflix do?

  • They created the Market for Movie Streaming Platforms.

 

A Platform that was much better than illegal platforms with a very competitive price.

McDonalds - Blue Ocean Strategy example

 

In the 50’s, if you wanted a Burger, you only had one option:

  • Go to a Restaurant.
  • Wait for the waitress.
  • Make your order.
  • wait.
  • wait.
  • Have your burger.
  • Wait for the bill.
  • Pay and leave.

It didn’t matter how much of a hurry you were.

 

You had no other option.

 

What did McDonalds do?

  • McDonald’s created the Fast Food Restaurant Market.

 

Of course, Fast Food already existed before (every country has a type of “fast food”).

  • But McDonalds found the way to design Restaurants based on Fast Food.

 

Before McDonalds, you could have a quick Sandwich on the way.

 

But you didn’t have a place, a Restaurant, where you could sit and have a Diverse Menu that was delivered quickly at very affordable prices.

 

McDonalds did with food what Ford did with cars.

 

And… last but not least: McDonald’s products taste very good.

Summarizing

A Blue Ocean Strategy is the name of the optimal Strategy to follow in New Markets, with low Competition.

 

Blue Ocean Markets are Characterized for:

  • Little or no Competitors.
  • New Products or Services not yet fully Defined.
  • Uncertainty (often) about the Size that the Market can reach and its Future.

Therefore, a Company can grow without worrying too much about Competitors.

 

Blue Ocean Strategies should be based on:

  • Flexible Suppliers: Suppliers that can Adapt to Changes.
  • Study the New Players: Be aware of their Products and Approaches.
  • Focus on your Product: Substitute Products are not yet a Threat.
  • Comfortable Relationship with Clients: For you. Don’t push yourself too hard.
  • Competition: Grow Faster than them to become the Market Leader.

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