If you are involved in business, you have probably heard of the term blue ocean strategy. Blue ocean strategy is a term coined from the meaning of “few competitors and no bloodshed” in the market or business. However, many people may not understand why blue ocean strategy is important or a detailed overview.
Therefore, in this article, we will provide an overview of the Blue Ocean Strategy and explain why it is important. We will also introduce the advantages and disadvantages of blue ocean strategy, as well as success stories, so please refer to it.
What is Blue Ocean Strategy?
First, I will explain the outline of Blue Ocean Strategy. Blue ocean strategy is a
marketing
term that means finding business models and markets with few competitors and competing in them. The term blue ocean is used because there is less competition and less blood flowing.
In business, it is much more important to earn stable profits over the medium to long term than to make large profits in the short term. In fact, many of the people reading this article may be wondering how to generate stable cash and profits.
In such cases, a blue ocean strategy with few competitors is useful. If the blue ocean strategy is successful, it will be possible to provide products of stable quality in a market with few competitors, making it possible to generate stable profits over the medium to long term.
What is Red Ocean?
I explained the blue ocean strategy earlier, but there is also the opposite term, red ocean. The term red ocean refers to the fact that the market is overcrowded with competing business models and products, and the ocean is dyed red with the blood of battle.
The red ocean strategy is definitely not recommended for companies aiming for the blue ocean strategy, which aims to accumulate small profits over the medium to long term. This is because overwhelming financial power is required to succeed with a red ocean strategy.
For example, the consumer electronics industry is a typical example of a red ocean. In Japan, new home appliances are coming out every day. Although the size of the market itself is large, in order to capture a large portion of the market, a corresponding amount of financial power is required, from the development costs of new products to advertising costs. Even if companies that want to accumulate profits enter the market, they probably know that they will not be able to compete with them.
Naturally, the red ocean strategy is a strategy that only the strong can employ, so it is extremely important for small and medium-sized businesses to make full use of the blue ocean strategy and accumulate small profits.
Why is blue ocean strategy important?
The reason why blue ocean strategy is important is that even small companies can generate stable profits. In the case of a red ocean strategy in which a large company participates, if it is successful, it will bring in a huge amount of cash and name recognition, but if it fails, the loss will be extremely large. This cannot be said to be a stable profit. Therefore, even if small and medium-sized enterprises try to achieve these goals, it is currently difficult.
On the other hand, in the case of a blue ocean strategy, you can profit from companies that use a red ocean strategy as described above without having to fight. If things go well, you can make a profit in the form of a drop-off from a company using a red ocean strategy, or you can develop a new market on a small scale and make a profit there as well.
As mentioned earlier, accumulating stable profits is extremely important in business and company management. Blue ocean strategy can be said to be a strategy that makes it easy to achieve these goals.
Benefits of blue ocean strategy
So far, we have provided an overview of the blue ocean strategy. From here, I will explain two advantages of the blue ocean strategy.
- low investment cost
- Generate stable profits
Let’s look at each in turn.
low investment cost
Blue ocean strategy involves creating products that are not available in the market or using strategies that are completely different from those of the competition. In a positive sense, there is no need to imitate competitors, so you can decide your prices freely. For these reasons, the blue ocean strategy allows you to start a business with low investment costs.
The lower the investment cost, the sooner the investment cost can be recovered, which means that profits can be accumulated sooner after the investment is recovered.
Generate stable profits
As mentioned above, blue ocean strategy does not require you to imitate your competitors. Since you can add value to your products and sell them, you will be able to collect potential customers unique to your company. If your potential customers become fans of your product, they are more likely to become repeat customers, allowing you to generate stable profits.
Disadvantages of blue ocean strategy
Earlier, I explained the benefits of the blue ocean strategy, but there are also disadvantages that are unique to the blue ocean strategy. There are two main reasons: The first is that you won’t get as much profit as the red ocean strategy.
The definition of success is different for each person, but for example, if your goal is to create a 10 billion yen company, it may be difficult to generate 10 billion yen in sales using only a blue ocean strategy. This is because if you want to generate sales of 10 billion yen, you need to capture a certain amount of pie in the existing red ocean market.
The second disadvantage is that there may not be any potential customers in the first place, rather than a blue ocean. If the product your company is planning to release does not exist in the current market, you need to reconsider why it does not exist in the market. The reason your product isn’t on the market in the first place is not because your competitors haven’t thought of it as an idea, but because your product may not exist in the first place because there are no potential customers.
Even if you sell the product in the above case, you will not be able to recover the investment cost and will end up with a negative result.
Framework important for blue ocean strategy
So far, we have explained the advantages and disadvantages of the blue ocean strategy. Using
a framework
is very useful when thinking about blue ocean strategies. Here, we will introduce two representative frameworks.
- strategy canvas
- action matrix
Let’s look at each in turn.
strategy canvas
The Strategy Canvas is a framework that describes competitiveness on the horizontal axis and competitiveness level on the vertical axis to determine whether Blue Ocean Strategy is important. When you combine the competitiveness and level of your company and that of other companies, if the lines intersect at different points, the blue ocean strategy can be considered effective.
However, just because the intersection of your company and other companies’ lines on the strategy canvas is different, you should not neglect market research. As mentioned above, find out why your competitors aren’t using a blue ocean strategy, and only implement it if you think it’s something you can do.
action matrix
The action matrix is a framework that divides segments into four categories: “remove,” “increase,” “reduce,” and “add.” The framework analyzes the company, competition, and market. It is suitable for checking whether a blue ocean strategy can be implemented by adding value or reducing personnel. You can also see how your company should change in the future.
Examples of successful blue ocean strategies
Finally, I would like to introduce three examples of successful blue ocean strategies.
- uniqlo case
- IKEA case
- overseas cases
Let’s look at each in turn.
uniqlo case
In addition to its existing strategy, Uniqlo adopted a blue ocean strategy in the form of “high value-added functional clothing.” We provide products such as Silky Dry and Heattech as high value-added functional clothing, reducing distribution costs, etc., while also working on O2O such as advertising on our own app and distributing coupons to mobile members, making it easier for consumers to reach them. There is a background that we devised this. This is a typical example of a blue ocean strategy that aims to achieve low costs while also differentiating itself from other companies.
IKEA case
IKEA has adopted two blue ocean strategies. The first is that the furniture is delivered very quickly. Because the delivery speed is faster than its competitors, more and more consumers are turning to IKEA for things like moving or office relocation.
The second thing is that we have a model room. Although there are many other furniture stores that have model rooms available, they are unique in that they are designed to make it easier for consumers to imagine themselves using the model rooms.
overseas cases
Overseas, a company called Southwest Airlines has adopted a blue ocean strategy. Although in-flight services are kept to a minimum compared to other foreign airlines, the costs are significantly lower, and the airline has succeeded in attracting consumers who are on a budget.
summary
In this article, we have explained the Blue Ocean Strategy. The blue ocean strategy has the advantage of having low investment costs and being able to provide customers with products of stable quality, making it easier for companies to make profits. On the other hand, if a blue ocean strategy is successful, there will be competitors who imitate it, so countermeasures must always be taken to deal with them.
In order to differentiate yourself from your competitors and generate stable profits, why not consider the blue ocean strategy your company should adopt?