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  • Writer's pictureGreat Companies

Know It All: The Blue Ocean Strategy

Oct 19, 2017

"Blue Ocean" is a slang term for the uncontested market space for an unknown industry or innovation.

In an established industry, companies compete with each other for every piece of available market share. The competition is often so intense that some firms cannot sustain themselves. This type of industry describes a red ocean, representing saturated market share bloodied by competition.

Blue Ocean in contrast symbolizes high profit potentials. According to the Economic Times Blue Ocean Strategy is referred to a market for a product where there is no competition or very less competition. This strategy revolves around searching for a business in which very few firms operate and where there is no pricing pressure.

The basic strategy is to capture the market demand and introduce a new product or a product with superior features so as to make the competing products irrelevant.

Blue ocean strategy is linked with creating your own market. However, what really happens is the creation of a new product rather a better one. It is imperative that the timing of introducing the product in the market is correct. The timing is dependent on the demand, if the demand is too high, and then there is a chance that soon after your product many companies will follow with similar products, the ocean in such case turns from red to blue.

If the demand is not much then the product, in spite of it being unique, will not be able to make profits. The demand in the market has to be just enough to allow producers to make profit and at the same time not allure competing firms to enter the market.

One challenge is to gauge the demand for a product in the market that has not yet been launched. This can be done through extensive consumer surveys and analysis of current market trends.

Using the blue ocean strategy, a producer can build a monopolistic market in some sense, but this monopoly is not secured forever. For as long as the monopolistic market rests with the producer, It helps the company in make huge profits as the product can be priced a little steep because of its unique features.

For example: Apple ventured into digital music in 2003 with its product iTunes. Apple users can download legal and high quality music at a reasonable price from iTunes making traditional sources of distribution of music irrelevant. Earlier compact disks or CDs were used as a traditional medium to distribute and listen to music.

Apple was successful in capturing the growing demand of music for users on the go. All the available Apple products have iTunes for users to download music.

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