What is Blue Ocean Strategy? by Nattida Sae-Iw MBA Student What is Blue Ocean Strategy? Let’s start with the metaphors To understand the term of Blue Ocean, imagine a market universe composed of two sorts of oceans: Red Oceans and Blue Oceans. Red Oceans represent the existing market space which is known market. Companies in red oceans are competitive-base; they are fighting each other and aim to get a bigger market share from their competitors. The world now is globalized, the competitions are fiercer than ever, they are battling on the same demand thus this is bloody competition.
That’s why it’s called red oceans. Blue Oceans are new, defined as unknown market space. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue oceans are the opportunity for highly profitable growth. The space is new, no battle so it’s clear market, that’s why this is called Blue Ocean. Productivity ManagementCreativity Management Companies are always successful in the red ocean. How many companies tend to follow the right side of the diagram? Most of companies are tending to follow the left side as that’s normal practice and easier.
The right side is a risk taking and companies are trying to avoid it. The red ocean is always matter and is a fact of business life. However, with exceeding demand and more competitors, companies need to go beyond competing. To grow business opportunity, the companies need to create blue oceans. Unfortunately, blue oceans are uncharted and large. Without guideline and frameworks to create blue oceans is seen to be risky. Therefore, there are some methodologies to help on how to create them. According to the article, it can be summarized that the basic structure of creating blue oceans are as follows: Focus on Future, answer yourself with these questions whether you are ready to create blue oceans. Simple questions you need to challenge you are really blue color. How Blue is your strategy: 1. Creating new demand instead of striving to do better than competitors 2. Looking for non-customers instead of getting a bigger share of customers 3. Challenging assumptions and reconstructing industry 4. Voluntary participating self- initiated teams 5. Executing strategies while conserving time and resources • Strategies Canvas – Capture both current state and also demand side of alternatives 1.
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Do dimension on graph: value factors that are important, what your industry focuses on. Graph the company then graph for your own 2. Look at the frameworks 3. Try to answer 4 questions (New value curve) and review what does the industry curve look like? And what does your company’s curve look like? Then apply four actions frameworks to build a winning strategy. Reduce: Which factors should be reduced well below the industry’s standard? Eliminate: Which of the factors that the industry takes for granted should be eliminated? Raise: Which factors should be raised well above the industry’s standard?
Create: Which factors should be created that the industry has never offered? Blue Ocean is not about taking risk and also not avoiding risk. It’s maximizing opportunities and minimizing risks. Blue Ocean focuses on six different risks that are associated with formulations strategy. o Search risk – How you come up with the right idea? o Planning risk – Not just let strategic tools store in document shelf. Create a big picture and make it visualized. o Scale risk – To make sure you are going out to the ocean, not just a pool and try to reach beyond existing demand. Business model risk – Get the strategic sequence right o Organizational risk – Strategy must come together with good resources. o Management risk – Motivation which is associated with people’s attitudes and behaviors. 4. Execute – After lying out the tools and frameworks in the formulation and then motivating people to act on and execute a blue ocean strategy. In short, Blue Ocean is about changing in what current industries believe, and create new value to serve customers, that’s called “Value Innovation”.
Focusing on non-customers and find out why they are non-customers then provide high value to them and change them from non-customers to be your customers (Create and capture new demand). Besides, the creation of Blue Ocean is about driving costs structure down while driving value up for buyers. This systematic process is all about Blue Ocean point of view. ----------------------- Managing cost Quality Control Assets Utilization Operational Efficiency Growth/ Innovation Creativity methods New Brand Development Global Reach
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