The "five-power" model of Porter explores specific factors. This helps a company to see if they can be popular based on your rivals. Blue Ocean is a plan that promotes great rivalry while remaining in the red ocean.
Making the move
When there is little growth potential, companies try to look for sectors. This is to seek new markets to enjoy an unchallenged share of the market. The aim is to grab a new market with a better product, making rivalry negligible. This is may not be active.
Blue Ocean was found in 2005, which is still used today.
- In an unchallenged marketplace, Blue Ocean considers it as an untouched region.
- There are 150 Blue Ocean tactics used by companies for over 100 years.
All in all, the blue ocean market has many features that businessman love. There are no rivals in a pure blue ocean market. In the Blue Ocean market, the leader will have many benefits, such as first time moving, price. The market leader can set prices without problems. And freedom to take its products in different ways.
The first example to mention is Amazon. It's moved from an online store to a new platform that sells anything.
Just think of the first blue ocean move in book retailing, which separated it from others—providing the world's biggest range of books, great prices, and order alert. Amazon doesn't always succeed in creating Blue Oceans. It has struggled against eBay and Apple in a few cases.
In these situations, Amazon's rivals built their blue oceans, and when Amazon tried to copy them, but they fell. The lesson learned is that offense is the best defense. And the best offense is to create a blue ocean shift and create your blue ocean. Copying isn't the road to glory, especially in the crowded markets. This is what a lot of today's companies deal with.
The key to business success is to reshape the rules of the competition and move into the blue ocean. The objective of these plans is not to beat rivals, but to make them useless. Blue Ocean advises companies to follow the Four Actions plan. This is to find the unknown market.
The model asks four key questions:
Raise: What aspects should be placed above the industry standard?
Reduce: What aspects came from fighting with other companies that can be reduced?
Eliminate: Which elements the industry has long fought the need to be removed?
Create: What aspects should be built that the business has never given?
This task allows the company to review any strategic factor. It is to find the hidden thoughts of leaders when competing. We could then check their businesses for blue oceans and make a move.
It also outlines the Blue Ocean Plan's four principles. These four principles discuss how a company can build Blue Oceans by going around six market limits.
The four principles are:
How to create issue less market by rebuilding market borders.
Refocus on the big picture.
To expand beyond existing supply and demand in the new industry.
Get the strategic series right.
Blue Ocean plan, on the other end, is based on the belief that business limits and structure are not provided. And can be rebuilt by market player's views and actions. That's what's called the creator's view. Assuming that the structure and the limits of the market exist only in the minds of managers. Experts who share this view may not allow current market formations to restrict their thought.
To them, there is extra demand but mostly untapped. The heart of the problem will be how to make it happen. This needs a change of focus from supply to demand, from attention on rivals to a focus on value research. That is, the creation of creative value to unlock new orders.
This is done through a continuous search of differences and low cost. As the market structure change by splitting the price/value balance, as they are the rules of the game. The contest is thus obsolete in the old concept. The new value is created by increasing the demand side of the economy. Therefore, such a plan makes firms to play a non-zero-sum game with significant profit options.
"The road to success and the road to failure are almost exactly the same." -- Colin R. Davis
Kim and Mauborgne say that new approaches (red ocean) are required to maintain a high value. (Businesses) has to go past fighting. We also need blue oceans to capture new profit and growth opportunities. Competition-based plans say vying aspects are given to the market. And companies are forced to settle within the rules. To support themselves in the market, Red Ocean plan experts focus on creating an edge over rivals. This is done by reviewing what rivals do and trying to get better.
Here, winning a larger piece of the market can be seen as a zero-sum game in which one company's profit is gained at the loss of another. Cost and benefits are seen as a prize, and business takes a distinctive price or position of difference. Outside elements define the market's profit level. Companies collect and share wealth than creating it. They focus on splitting the red ocean, where growth is limited.
Chan Kim & Renée Mauborgne created ' Red ocean ' and ' Blue ocean ' in their classic book, Blue Ocean Strategy. This was to describe the market world.
Blue oceans speak about all untapped sectors. The market not seen and untouched by rivals. Demand is developed in blue oceans, not fought over. There's enough space for growth that can be productive and fast.
Rivalry in the blue oceans is meaningless as the rules are to be created. A blue ocean is an outline of the broader, greater potential in an untapped market area. A blue ocean is broad, deep, and powerful for productive growth.
Blue Ocean Strategy is the pursuit of different and lower costs to create a new market and demand. It is about creating and controlling a new market and make rivals fail. Companies should look for fresh markets and methods to recreate the market.
In short, avoid a direct price war, but focus on research. It is based on the view that business limits and structure are not provided. And can be rebuilt by opinions and actions of companies.