Blue Ocean Strategy: Meaning, Advantages, and Disadvantages

Blue Ocean Strategy: Meaning, Advantages and Disadvantages

Blue Ocean Strategy is identified as the market for a product or a service where there is minimum competition or no competition. This strategy has been developed for searching for business opportunities where there are very few businesses operating in the market in a particular sector and there is no pressure for pricing.

In a business world where the companies try to outperform their rivals by using various advertising, pricing, and other tactics, the blue ocean strategy uses a different approach to enter and survive in the market.

The concept of blue ocean technology was introduced by W. Chan Kim and Renee Mauborgne after conducting a study of 150 strategic moved to span up to 100 years in 30 industries. Based on their study, they have found that the best way for the companies to generate demand in a new market option rather than competing in the same market with many competitor products. These findings were included in their book ” The Blue Ocean Strategy” published in 2005.

In an established business industry, the businesses are competing with each other to achieve a competitive edge in the available market share. The competition gets intense most of the time making some firms exit the market as they are not able to sustain themselves. This type of industry is known as the red ocean, due to the fierce competition with cutthroat strategies of the companies.

Blue ocean suggests the opposite of the red ocean strategy. It proposes to use an innovation management approach and find the market opportunities that can satisfy unmet customer needs and wants. These areas have uncontested competition and allow businesses to enter the market without price pressure. This strategy provides the best path for entrepreneurship and creativity to reach new market opportunities.

When considering overall, blue ocean markets have several key benefits that help to get highlighted and to attract entrepreneurs to the business.

Advantages of Blue Ocean Strategy

– No competition/ minimum competition

Blue ocean markets have no/less number of businesses that provide the same product to the market. This makes the market less competitive for the new entrants.

– First-mover advantages

Since there is no competition in the industry, the first entrant to the market can gain the maximum advantage based on the blue ocean strategy. They can gain a maximum market share and maximum profit advantages.

– Price benefits

Since there is no competition, the business can set its prices without competitor constraints. It also makes it easier for the business to make its prices flexible in various directions.

There are several disadvantages that can also be identified in entering into a blue ocean market.

Disadvantages of Blue Ocean Strategy

– Difficulty in finding the right blue ocean

For the new entrants, it is difficult to find the right blue ocean market to enter. It is difficult to come up with new ideas that can get a profitable market share and the business has to conduct the right research to find such a target market.

– Risk of arriving too early

Entering the market too early is a risk to the business. There is a possibility that the customer might not understand what the business is trying to sell and how beneficial the product might be. The technology and the customer preferences might not be developed up to the extent where the business can create a profit. In a situation like this, the business has to bear a loss and exit the market.

– Risk of being too new or too different

When a new entrant to a market is providing completely new products or completely different products, winning customer loyalty and attraction is not easy. It creates suspicion in the customers and they are usually hesitant to use the product at once. It can create short-term losses to the business until they gain the customer’s trust in the product.

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