Is your company in the blue ocean or in the red ocean?
“Is your company in the blue ocean or in the red ocean?” by Márcia Monteiro
The blue ocean strategy emerged from the book “The Blue Ocean Strategy” by W. Chan Kim and Renee Mauborgne and represents the search for differentiation of a low-cost product or service, making competition irrelevant.
Today, most companies and organisations operate in highly competitive markets and each one seeks for an outstanding position. However, when the product or service is found under pressure regarding prices, that company or organisation might feel threatened, especially in saturated markets (red ocean). Thus, we can conclude that the blue ocean represents a market with a growth potential and the red ocean represents a highly competitive and, in some cases, saturated market.
According to Chan Kim and Renée Mauborgne there’s a structure of decisions that must be taken differently according to the ocean:
Red Ocean: compete in an existing marketplace, beat the competition, explore the demand for existing products or services, eliminate trade-off between value and cost, and align the company’s system of activities with a strategic choice of differentiation or low cost.
Blue Ocean: create new unexplored markets, make competition irrelevant, create new demands, eliminate the trade-off between value and cost, and align the system of activities of the company or organisation in the search for differentiation or low cost.
Therefore, the blue ocean strategy seeks to find new demands to make competition irrelevant by introducing products or services with differentiating characteristics. When a company or organisation decides to adopt a blue ocean strategy, it needs to find blue oceans, that is, unexplored markets by developing an existing product or service with new features. Knowing the blue ocean value curve is a way of visualising which features customers value the most in a product or service, it would be interesting if companies and organisations listed the features of a product or service, and then highlighted which ones are used to compete, and the ones that aren’t used for unexplored markets yet. The Canvas model is a fundamental tool used in the blue ocean structure.
If you’re interested on adding value to a product or service value curve, you can make four decisions:
– Creation: Create new industry factors that might create value or a new market.
– Reduction: reduce any of these factors that were a consequence of competition between companies and organisations.
– Elimination: identify which factors have been at the basis of the competition between companies and organisations.
– Increase: identify the factors that need to be improved.
If the company or organisation wishes to move from a red ocean to a blue one, then it will be necessary to create a product or service that is unique and different and that will bring value to the customer. It’s not necessary to create an ultra-segmented product or service, or include features towards market niches, but there must be a commitment to deliver the final value proposition.
Márcia Monteiro – MA Marketing Course Leader
London School of Design and Marketing