Blue Ocean Strategy

Established markets can be an exceptionally challenging space to launch a new product or service. The Blue Ocean Strategy offers a potential solution to this dilemma by building an entirely uncontested market niche from scratch. The reason we call it Blue Ocean Strategies is because it all is about the alignment of the value proposition, profit proposition, and people proposition of an organization, to simultaneously achieve what we call value innovation, which is differentiation and low cost (Mauborgne, 2011). The idea originally gained notoriety when W. Chan Kim published his influential book describing innovative Blue Ocean tactics in 2005. Since that time, a significant number of companies have adopted these tactics to launch new products in quickly evolving industries. The goal of this paper is to highlight the key aspects of Blue Ocean Strategy and identify a product that has successfully used this market philosophy in recent history.

Blue Ocean Strategy Description

The most fundamental aspect of Blue Ocean Strategy is its goal to create a new market space that is not occupied by competitors. Markets that have been established for a long time consist of competitors that have developed consumer loyalty for virtually every major niche.  Any new upstart product entering this space will need to present a significant value proposition that attracts customers who are already loyal to other brands. As an alternative, Blue Ocean Strategy advocates that marketers envision a product or service goes beyond current demand and makes the competition irrelevant.

Although this seems like a high-risk proposition, it is possible to achieve when backed by an appropriate marketing strategy. The first step is to focus on value innovation, which can be achieved in four different ways – elimination of undesirable factors, reduction of factors below standards, raise of factors above standards, or the creation of new, unexpected factors. The second step to develop a viable product that can create demand independent of competitors. An ideal product should add value in ways that will surprise both customers and competitors. The third and final step is to implement management processes that can adapt to change and educate the customer base about the product’s value proposition (Kim 2005).

Example of a Blue Ocean Product Strategy

An example of a product that could be considered a blue ocean move is Five Hour Energy drink products. At the time of its launch, the energy drink market was exploding in popularity and the market was flooded hundreds of brands. Each brand suited a different niche in the market, but all shared similar core traits – 8oz volume, high in sugar, carbonated, etc. The founder of Five Hour Energy, Manoj Bhargava, recognized that this market was oversaturated with competition and believed that consumers would benefit from a smaller portion that did not contain sugar. Backed by an aggressive television advertising campaign and strategic product placement, Five Hour Energy was able to create demand for a completely new type of product (Parker-Pope 2012). Many new competitors have since entered this market, but the initial blue ocean opportunity has allowed Five Hour Energy to remain the dominant product leader.

Comparison with Red Ocean Strategy

A red ocean strategy is a conventional approach to business that is based on overcoming competition by creating a superior product, whether it be in price, quality, branding, or placement. This is often seen as a zero-sum game where a fixed number of customers are shared between multiple competing firms. One of the motivations behind the Blue Ocean Strategy book was the fact that new products in established markets tend to fail, even when they are superior to face value (Kim 2005). Consumers have a tendency for brand loyalty despite the availability of superior alternatives, even when it is completely irrational. For instance, a red ocean strategy for a new battery brand that wants to compete with Duracell or Energizer will need to demonstrate significant value to consumers to pull them away from these highly recognized brands.  Similarly, if Five Hour Energy followed a red ocean strategy, it is unlikely that it would have been able to overcome the initial brand success of competitors like Red Bull.

Conclusion

Blue Ocean Strategy has been very influential in our technology-based economy. Innovative startup companies have been finding ways to use technology to create valuable markets that are free of competition. Five Hour Energy is just one small product out of many that has made a blue ocean move over the last ten years. With the pace of development in the United States, it is likely that we will see an influx of new markets in the years to come

References

Kim, W. C. (2005). Blue Ocean Strategy: How to Create Uncontested Market Space and

Make Competition Irrelevant/W. Chan Kim, Renee Mauborgne. Harvard Business Review.

Mauborgne, R. (2011). Overview: Blue Ocean Strategy [Video file]. Retrieved from Skillsoft website: http://mmlviewer.books24x7.com/toc.asp?bookid=40407

Parker-Pope, T. (2012). The Rise of the 5-Hour Energy Drink. New York Times.

Retrieved from http://well.blogs.nytimes.com/2012/02/29/the-rise-of-the-5-hour-energy-drink

 

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