Blue ocean strategy. The way to increase profits in your company

Most market mechanisms are the result of the dominance of so-called red oceans. This term refers to the fierce competition between different business entities. Economic conditions are becoming more challenging, and it is more difficult to increase profits. The answer to this situation is the blue ocean strategy. Read on to learn more.

What is the blue ocean strategy?

Applying the blue ocean strategy to your business requires finding an unmet consumer need and creating new demand. Entering a new market guarantees a total monopoly. We can identify three characteristics of this strategic model that set it apart from others:

• Competition is no longer relevant − your task is to create the framework for an entirely new type of industry in which you have no serious competitors,
• Practical approach − a blue ocean strategy is based on research and data, not just ideas, unlike some strategies that prove ineffective when they collide with market realities,
• Differentiation and low prices go hand-in-hand − in the case of red ocean companies, consumers typically choose between value and price. But when a company finds a way to reduce costs while maintaining high quality and usability, it is called value innovation.

How to develop a blue ocean strategy in your company?

Introducing the blue ocean strategy into your business may be the answer to the saturation of existing markets. Below, we will provide useful tools and recommendations to help you make the changes you need.

Blue ocean leadership grid

To find a promising blue ocean, you need to create your leadership grid. It shows which competitive factors you should put emphasis on and which solutions you should abandon. How to do it?

• Raise

Do you know what features of your products should be highlighted and developed in your industry?

• Reduce

If there are products or services that do not have a significant impact on the company’s success, you can reduce their share.

• Eliminate

Areas of activity that are not essential, but do have the potential for cost reduction should be eliminated.

• Create

You can develop a new product or introduce an idea that will somehow set a new direction for the industry or even create it.

Strategy canvas

It is a line graph showing the competitive factors (on the X axis) and the level of supply (on the Y axis). It allows us to compare our company with the rest of the competitors in the market. The situation of the different players is represented by a value curve. It shows how we can differentiate ourselves from the competition and what we can give up.

Steps to creating the blue ocean strategy

Regardless of the type of business, the following tips will help you move from red ocean markets to new market areas with many opportunities for growth.

1. Examine your situation. Using tools such as a blue ocean leadership grid or strategy canvas, determine where you can take the initiative. Consider external factors, constraints, and your available resources to assess your opportunities.
2. Think what you can achieve. Once you know how it is, you can move on to thinking as if it could be. Identifying customer value and weaknesses in your strategy will widen your horizons.
3. Find ways to achieve this. Develop a strategy that will help you stand out from the competition.
4. Take action. According to the prepared plan, perform the first action in the direction you set.

The pros and cons of the blue ocean strategy

Pros

• It allows you to identify growth opportunities and makes it easier to take advantage of favorable conditions,
• It works in real market conditions and is data-driven,
• Deviates from the classic methods used in red ocean businesses to achieve a dominant position,
• Creates entirely new value for customers that they can’t find among competitors – value innovation.

Cons

• Developing a unique blue ocean strategy is difficult due to market saturation and requires more work and preparation,
• Departing from the classic model means taking a big risk – you may not find demand for your products or services.

Applying the blue ocean strategy has guaranteed many companies huge profits and eliminated most of their competitors. The public has also benefited by receiving unique products or services that meet their needs. Creating such a plan is not easy, it requires an innovative approach and great determination to achieve the goal. However, it is worth seeking and trying different solutions, perhaps they will become a “ladder” to your future success.

Blue ocean strategy examples

Cemex

One of the largest cement producers applied the Blue Ocean strategy by adding emotional value to the promotion of its offer. The product was not attractive in the Mexican market, despite its relatively low price and overcrowding. Multi-generational families usually lived in a single household, and they were reluctant to invest in expanding living space. Resources were much more likely to be used for weddings, baptisms, etc.

The company decided to capitalize on this attachment to tradition and introduced the Paitrimonio Hoy. This was a savings program in which willing individuals would deposit a certain amount of money so that the accumulated funds could later be distributed for a chosen purpose. Usually, the funds were used for family celebrations, but in this case, the funds were to be used for home improvements. When needed, Cemex provided the necessary building materials, thereby increasing its profits and supporting the local community.

Peirce College

Peirce College recognized and tapped into an unmet need among potential consumers. Post-secondary and university education was viewed as the domain of young people. They decided to change that mindset by focusing on working professionals who still wanted to improve their skills and gain knowledge.

Taking advantage of the development of the Internet, they offered distance learning programs, as well as organized courses away from the university campus (e.g., in companies and organizations). The flexible approach allowed people to gain knowledge and gave them the opportunity to advance their careers. In addition, innovations were introduced while avoiding large financial expenditures. Funds to develop the necessary technological solutions were obtained by eliminating programs that were not in demand.

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