Blue Ocean Strategy

Blue Ocean Strategy is a strategy to try to develop an inexistent market which is free of competition instead of competing with rivals in an existing market.

 

1. Overview

The strategy to try to develop a new market with unprecedented products and services.

We tend to target an existing market when developing new products. In this strategy, however, we analyze the needs of “Non-customers” who currently are not consuming our products instead of analyzing the needs of existing markets . Blue Ocean Strategy can be achieved by achieving simultaneously differentiation and low cost (attaining Value Innovation), and having a clear difference from competitors.

For specific example: 10 minutes for 1000 JPY barbers. Nintendo’s game Wii which was announced in the time where competition focused on speed. IKEA’s retail business which asks customers to assemble the furniture while emphasizing durability and safety.

 


2. History

W. Chan Kim and Renée Mauborgne proposed the strategy in their book, “Blue Ocean Strategy”(Published in February 2005). (Professors at INSEAD, the European Institute of Business Administration in France)

  • Red Ocean: An existing market. It is required to take either a low-price strategy or differentiation (high added value) strategy, and where multiple companies are competing for best price and/or features.
  • Blue Ocean: An undeveloped market. Since it is a newly defined market made by stimulating unrecognized needs so far, there is no competition.

In the strategy planning step, you should clarify (1) the effect on the buyer, (2) price, (3) cost, and (4) the way of realizing them. In addition, when putting the strategy into practice, the development of (s1) Key Success Factor, (s2) Strategy Canvas, and (s3) Action Matrix is needed. In the end, attract a customer segment (Non-Customers) including competitors, who have not been targeted before.

 


3. New Market Development and Organizational Reform

Reforms are necessary to develop a Blue Ocean. There are useful tips in the paper “Fair Process:Managing in the Knowledge Economy” by Professor Chan Kim published in 1997.

  • Share need for Reform
  • Maintaining employees’ motivation

It is not an overstate to say that “Fair Process” follows three steps when making decisions : (1) Knowledge organizing as organization, (2) Explanation to organization, (3) Setting of goal. Which are essential for achieving a strategy.

Fair-process-three-principles

 


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