Strategy is defined in the annals of human kind for centuries. It derives its importance from the erstwhile era of military conquests where the “strategies” adopted by opposing parties would mostly dictate the outcome of a war and thus, the future of a particular landmass. Generally, a new company or firm starts its existence in a highly competitive market environment. In the book, the idea of the world’s business environs being divided into two oceans has been brought up.
Companies try to outperform each other in red oceans while they try to make people aware and try to capture the first mover advantage in a blue ocean strategy. Blue Ocean includes both creation of completely new markets through new products and ideas or creating a market which is an extension of the current market and yields to new ideas by increasing the possible market a particular product can cater to. Blue Ocean initiatives tend to lead to a higher profit margin due to a higher level of profitable sales.
Blue oceans should be adopted due to the accelerated technological advances that have markedly improved industrial productivity and have also allowed suppliers to produce a huge array of products and services. The trend towards globalization amplifies the situation. As trade barriers between nations and regions get dissolved and as information related to products and prices becomes globally available in all local markets, niche markets and monopoly-havens continue to disappear. Strategy Canvas
Strategy Canvas is a tool to map out any Blue Ocean strategy and increase its effectiveness. It helps in understanding the current focus of all the players in any industry and the factors on which the players compete for a foothold in the current market space. With the aid of this canvas, a player in the industry can shift the individual focus from the current high competition zones to the relatively low competition ones or to altogether new zones and also shift the focus from customers to the “non-customers”.
In pursuit of a two-pronged approach dealing with maximisation of value and minimisation of cost, a firm should resist against benchmarking against competition 4-Actions Framework & Eliminate-Reduce-Create-Raise Grid Any firm in an industry can tap the benefits of a Blue Ocean in any industry with respect to four key elements and they are: 1. Elimination of Factors of Competition in an Industry
2. Elimination of Increased Costs due to Over-serving the customers 3. Identification and Elimination of Factors on which Customers compromise 4. Discovery of New value sources for buyers & Creation of New Demand The first two factors help in control of the costs involved while the other two factors help in increasing the customer value. The grid in the figure above indicates the grid which is used in conjunction with the 4-actions framework and helps companies in not only asking the questions related to the four actions, it also enables them to act on the drivers so as to increase value. Characteristics of a Good Strategy
Whenever a company adopts Blue Ocean Strategy, it always has 3 characteristics which set it apart from other strategies in its makeup of success. They are: 1. Focus 2. Divergence 3. Compelling Tagline Without the above, the strategy of any firm is perceived to be muddled up, undifferentiated, costly and low on the communication aspect. The compliance of any blue ocean strategy to the above specified tenets should be the first test for the analysis or viability of any new idea conceived by a firm.