Blue Ocean

What Is Blue Ocean?

Blue ocean is an entrepreneurship industry term made in 2005 to depict another market with little competition or barriers standing in the method of trailblazers. The term alludes to the immense "void ocean" of market options and opportunities that happen when a new or obscure industry or innovation shows up.

The term "blue ocean" was coined by INSEAD business school teachers Chan Kim and Renee Mauborgne in their book Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant (2005). The creators characterize blue oceans as those markets associated with high expected profits.

How a Blue Ocean Works

In a laid out industry, companies compete with one another for each piece of accessible market share. The competition is frequently extraordinary to the point that a few firms can't support themselves. This type of industry depicts a red ocean, addressing a saturated market bloodied by competition.

Blue oceans offer the inverse. Many firms decide to enhance or extend with expectations of finding a blue ocean market with uncontested competition. Blue ocean markets are additionally of high interest to [entrepreneurs](/business visionary).

Overall, blue ocean markets have several attributes that trend-setters and entrepreneurs love. A pure blue ocean market has no competitors. A blue ocean market business leader has first-mover benefits, cost benefits in marketing with no competition, the ability to set prices without competitive constraints, and the flexibility to steer its offering in different headings.

Business leaders with inventive products and services who can recognize blue ocean markets have vast opportunities.

Blue Ocean versus Red Ocean Strategies

In contrast to a blue ocean, a red ocean portrays an environment of vicious competition among numerous industry players. Since the marketplace is crowded with rivals, new companies must fight savagely for a share of any profits.

Companies in a red ocean business environment will utilize totally different business strategies than those that have a marketplace to themselves. As opposed to try to encourage interest, red ocean companies try to draw in existing consumers through marketing, lower prices, or further developed products. For instance, consider the marketplace for [car insurance](/collision protection): most insurers sell almost indistinguishable products, and try to capture market share by offering a more appealing deal than their competitors.

Instances of Blue Ocean Companies

A blue ocean is specific to an overall setting. Passage and Apple are two instances of leading companies that made their blue oceans by seeking after high product separation for a generally minimal price, which likewise raised the barriers for competition. They likewise were paradigmatic of thriving industries at the time that were subsequently exemplified and copied by others.

Passage Motor Co.

In 1908, Ford Motor Co. presented the Model T as the vehicle for the general population. It just came in one color and one model, however it was solid, durable, and affordable.

At that point, the automobile industry was still in its outset with roughly 500 automakers creating uniquely crafted cars that were more costly and less solid. Portage made another manufacturing interaction for efficiently manufacturing normalized cars for a portion of the price of its competitors.

The Model T's market share bounced from 9% in 1908 to 61% in 1921, authoritatively supplanting the pony drawn carriage as the principal mode of transportation.

Apple Inc.

Apple Inc. found a blue ocean with its iTunes music download service. While billions of music records were being downloaded every month illegally, Apple made the first legal configuration for downloading music in 2003.

It was not difficult to utilize, furnishing users with the ability to buy individual melodies at a reasonable price. Apple prevailed upon a great many music audience members who had been pilfering music by offering higher-quality sound alongside search and route capabilities. Apple made iTunes a mutual benefit win for the music producers, music audience members, and Apple by making another flood of revenue from another market while giving more convenient access to music.

Netflix

One more illustration of a blue ocean firm is Netflix, a company that reexamined media outlets during the 2000s. As opposed to enter the competitive marketplace of video rental stores, Netflix made new models of amusement: first by introducing mail-request video rentals, and later by spearheading the first web based video platform paid for by client subscriptions.

Following their prosperity, numerous different companies have followed in Netflix's strides. Therefore, any new company trying to send off a video subscription model will end up facing a red ocean as opposed to a blue one.

The Bottom Line

A blue ocean portrays a business visionary's dream: an unexplored market, with no competition, allowing pioneers to make and present new products that capture a large share of the market. In any case, a blue ocean isn't generally simple cruising. Entrepreneurs who try to utilize a blue ocean strategy must first make their own market, draw in customers and foster a product that has never been attempted. Therefore, effective blue ocean opportunities can be rare and far between.

Highlights

• Blue oceans are contrasted with "red oceans," portrayed by relentless competition and crowded markets.
• In their book, Kim and Mauborgne expounded on 150 blue ocean strategies that have been attempted by companies over around 100 years.
• The term was coined by Chan Kim and Renee Mauborgne in the book Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant.
• A blue ocean is considered (from a marketing standpoint) a yet unexploited or uncontested market space.
• Blue ocean firms will generally be trailblazers of their time.

FAQ

Why Is a Blue Ocean Strategy Difficult to Implement?

Blue ocean strategies are challenging to carry out for a simple explanation: in the event that it were simple, somebody likely would have previously made it happen. Since blue ocean strategies require recognizing undiscovered markets, and in some cases rethinking the market itself, a blue ocean strategy is a high-risk play that doesn't necessarily pay off. At the point when it succeeds, in any case, the rewards are considerable.

What Was JCPenney's Failed Blue Ocean Strategy?

In 2011, JCPenney made a stupendous strategic bungle under its new CEO, Ron Johnson, who endeavored to pivot the company towards a blue ocean strategy. At that point, JCPenney had a few financial battles however was as yet viewed as an industry leader for value shopping. Johnson endeavored to separate JCPenney to a more upscale clientele, with in-store shops and exclusive merchandise. Simultaneously, he got rid of the clearance racks and coupons that pulled in the company's most steadfast customers.To exacerbate the situation, as opposed to testing the changes on a small group of experimental stores, Johnson executed them in every one of the 1800 JCPenney stores. After under 18 months in charge, JCPenney dropped out of the S&P 500 Index and Johnson was fired.

What Are the Steps to Implement a Blue Ocean Strategy?

In Blue Ocean Shift, Kim and Mauborgne spread out a five-step process for a company seeking to pivot to a blue ocean strategy. In short, they are:1. Begin the interaction: pick a starting point and make the right team. 1. Comprehend where you are presently: recognize the current state of play for your team, including assets and weaknesses.1. Envision where you could be: determine hidden pain points, and recognize the non-customers you might want to reach.1. Find how you arrive: foster alternative options and begin reconstructing market boundaries.1. Take your action: formalize a 10,000 foot view model and quickly test your blue-ocean move.