*Blue Ocean Strategy: Creating Your Own Market

Introduction

Instead of viciously competing with other companies, find a way to work in a marketplace free of competitors.

  • The blue ocean strategy encourages tweaking your products to push them into their own market with low prices and no competition.
  • Many household-name businesses have reached their current stature through blue ocean strategies, but the approach can be risky.
  • To implement a blue ocean strategy, grow your current team and identify pain points that only your business addresses. 
  • This article is for business owners interested in creating their own market rather than competing.

Let’s say the products and services you offer aren’t enabling you to meet your revenue goals. What if you could figure out how to tweak your products and services to make them an industry of their own? 

This is precisely what the blue ocean strategy suggests, though household-name brands used this approach long before a 2004 book gave it a name. We’ll explore how creating your own market has helped many businesses grow and share how your business can also benefit. Hi everyone!, I am {SPEAKER NAME}. AND welcome to my class thanks watching my intro. Hope you loved this and joined me in this class thanks

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Creating Blue Ocean

Red oceans represent traditional marketing. It is where companies try to beat one another.They compete for lower prices, better features, or more flashy advertising. Each of the companies tries to get a bigger share of the existing number of customers.And so what happens is that the market space gets overcrowded. The opportunities for profit and growth are becoming less and less. In an attempt to beat the competition, the companies produce similar products which the customers find boring and ineffective.There is a bloody cutthroat competition. That is why the ocean is red.Now, the blue ocean is a whole new kind of marketing. It is a marketing space that is unexplored. The opportunities for profit and growth are as abundant as a calm blue ocean. If a company creates a blue ocean, there is no competition, and there is no limit to the demand.
 
The only way to win over the competition is to stop trying. That is the logic of the blue ocean.What a company needs to do is to create a whole new kind of offer which the people really need and have been searching for a long time.One good example of a blue ocean is Cirque du Soleil. The circus industry is declining. Companies like Barnum & Barley and Ringling Bros. are glories of the past. Their target market is children, which is why their main attraction is animals.But in the present generation, children would rather play online games than watch a circus performance. Cirque du Soleil created a whole new market space by catering to adults and corporate clients. The company reinvented the circus.While other circuses competed for more lion tamers and more famous clowns, Cirque du Soleil simply didn’t care. They created a strikingly different and refreshing kind of show. Cirque combined circus and theatre into one. There is the fun and thrill of the circus but also the artistry and sophistication of theatre.
 
Each of Cirque’s shows has a theme or a storyline. There is also the original music composition which guides the lighting, performances, and timing of the acts. Cirque still uses clowns, but they do not have slapstick humor. They are more enchanting and artistic. Cirque also has acrobatics, but they are not only about the thrill. There is more grace and elegance in their stunts.Cirque du Soleil abandoned the use of animals altogether. Aside from the protest from animal groups, the maintenance, training, medical care, and transportation of animals are a great deal of concern.
 
Cirque also moved away from famous star performers, three-stage venues, and aisle concession sales.There are no star circus performers. The entertainment factor is weaved into the story and creativity of the acts. There are no three-stage venues which only make the people confused where to look. Cirque du Soleil designs their venues in a way that makes the people feel that they are entering a magical circus where they don’t know what to expect.By combining circus and theatre into one, Cirque du Soleil has provided a new kind of live entertainment. They reduced the costly elements of the circus and invested more in creativity. All in all, Cirque created a blue ocean that adults all over the world are willing to pay for.

Analytical Tools and Framework

For this chapter, you will learn about the important concepts of strategy canvas and four action frameworks. These analytical tools will help you study the market and decide the action you will take. To better understand, let’s talk about the U.S. wine industry.It is a red ocean.California wines compete head-to-head with wines imported from Spain, France, and Italy. The top eight companies beat each other within the 75% market share while 1,600 smaller companies fight over the remaining 25%.
 
The strategy canvas goes like this. It is a graph that lets you see the factors that brands are investing in and how much they invest in it. The factors are on the y-axis, while the amount is on the x-axis.In the U.S. wine industry, there are seven main factors. First is the price per bottle. The second is the elite packaging with wine-making terms. The third is high-class marketing. Fourth is aging quality. Fifth is the prestige of the vineyard. Sixth is the complexity of the wine’s taste. Seventh is the wine varieties to choose from.For the premium wines, all top companies invest almost equally in all seven factors. For the budget wines, smaller companies invest low on price, high on elite packaging, but also the same in all remaining factors. If you are one of these companies, no matter how you adjust the factors, you will not succeed.As long as you play with the same rules and try to outperform your competition, you will not win over the market.
 
Now, let’s take a look at Casella Wines from Australia and how its brand [yellow tail] created a blue ocean. [yellow tail] swept over the market since 2003 by making a fun, different, and easy-to-drink wine that even beer lovers and cocktail drinkers liked.[yellow tail] entered the U.S. market and became number one. It surpassed the premium wines imported from France and Italy. In 2003, [yellow tail]annual sales were at 4.5 million cases. The 750-ml bottle [yellow tail] red wine became the best-seller.[yellow tail] is a social drink that is appreciated by everyone. It is easy to drink. There is no complicated taste and terminology which only wine connoisseurs understand. [yellow tail] is soft, sweet, and fruity.
 
Even the bottle and packaging are different. All the other wine brands look the same while [yellow tail] is just black with neon colors. It is simple but striking. The only image is the kangaroo in the middle.Salesclerks at retail stores find it hard to sell other wines. That is because they are lost on the wine jargon as well. When [yellow tail] was introduced, there were only two choices which are red wine or white wine. Casella Wines had made it easier for consumers and retailers alike to select the product.How do you break free from the competition and set new rules on the market? How do you take the main factors to a whole new level, just like [yellow tail] did? The answer is the four actions framework.The four actions are eliminated, reduced, raised, and created. First, know which factors should be eliminated.They are factors irrelevant to the customers. Second, know which factors should be reduced.They are factors that the other companies invest too much in.
 
Third, know which factors should be raised. They are factors that need more attention. And fourth, know which factors should be created. They are factors that other companies have never offered or have never thought of before.In the case of [yellow tail], it eliminated the elite packaging, wine-making terms, aging qualities, and high-class marketing. It reduced vineyard prestige, wine varieties, and taste complexity. It raised retail store involvement and price versus budget wines. It created the new factors of fun and adventure, easy drinking as well as simple selection.By eliminating and reducing some factors, Casella Wines has cut production costs significantly. They didn’t have to wait for several decades to age the wine. They also lowered the risks.By creating new factors, it has won over the market. [yellow tail] converted even the non-drinkers by offering the fun, refreshing, simple, but good tasting wine. Casella Wines did not invest much in advertising, but the product still became a huge success.

Reconstructing Market Boundaries

In the next chapters, we will discuss more on how to formulate the blue ocean strategy. The first principle is to reconstruct market boundaries. If you look closely, you will see that companies sell their products within these boundaries. They have created a box and compete for more space inside it. Companies are stuck in the red ocean because they use the same strategy as everyone else. These are the mistakes that you shouldn’t make. Do not limit yourself within the industry. Do not focus on the accepted strategic groups like, for example, in cars, luxury, economy, or family car.Don’t focus on just one buyer group like, for example, purchaser, user, or influencer. Blue oceans can sweep through all of them. Do not limit the scope of your products or services. Supply what consumers need before, during, and after use.
 
If everybody else uses a functional approach, go for the emotional approach and vice versa.Lastly, do not focus on the same period of time. See the longer span of market trends.If you want to create a blue ocean and achieve extraordinary success, you should go beyond market boundaries. You should think outside the box. You should see across industries, across strategic groups, across buyer groups, scope of products, functional or emotional approach, and even time.Below are examples of blue oceans and how they reconstructed market boundaries.One path is to look across alternative industries. Corporate executives always need to travel. It is too costly for a company to own a private jet and maintain it. But it is also inconvenient to use commercial flights. There are long check-in lines, crowded airports, flight transfers, and overnight hotel stays.
 
Here comes along the airline company NetJets with an effective solution. They combined the convenience of private jets with the low price of commercial flights. That is by offering companies shared ownership of private jets.A company can own one-sixteenth ownership. It will share the aircraft with 15 other companies. Each of them is entitled to 50 hours of flight time per year. The price starts at only $375,000. That includes the pilot, jet maintenance, and other expenses. As compared to $6 million for a brand-new private jet, NetJets has created a win-win solution. Companies can save money, and NetJets doesn’t need much effort to fill in the seats. They don’t need to operate large aircraft because smaller ones are enough for their clients.Another path is to look across the emotional or functional approach. Quick Beauty House or QB House is a barbershop company based in Japan. They started with one store in 1996. QB expanded to 200 stores in 2003. QB’s secret to success is the shift from an emotional to a functional approach.
 
Before QB, Japanese men spend one hour getting a haircut. Why? Each customer is given a shoulder massage, hot towel, a cup of tea, shampoo and blow-dry, as well as facial hair shaving. The haircut itself is just one part of the ritual. Thus, there are long lines of customers waiting outside.QB set up a new standard. They recognized that most customers are working professionals. These men can’t afford to waste an hour inside a barbershop. So QB got rid of the emotional service.
 
No more hot towels, shoulder rubs, and tea. No offers of special hair treatments or shaving.QB only offered one thing, which is haircuts, and they did it efficiently. There’s no more shampoo and blow-dry. QB uses an overhead hose which serves as a vacuum cleaning all the excess hair. This technique is simpler and faster. The customer can get out of the barbershop in just ten minutes.Because of the eliminated factors, QB was able to offer cheaper service. QB haircut is only at $9, while the other barbershops are at $27 to $45. Also, QB can accommodate more customers every hour, which is why sales are 50% more than the competitors.

 Focusing on the Big Picture, Not the Numbers

This is the second principle in formulating a blue ocean. It is visualizing a strategic plan which is based on the bigger picture and not the numbers. Company executives and employees often get lost in the endless reports, which only tie them down to the red ocean.If you ask companies to explain the strategic plan in a few slides, they can’t do it. Executives and employees cannot answer at once what the strategy is. There is no clear direction as to what the goal is and how they can break away from the competition.For example, the catering manager of an airline can only compare the airline’s service in terms of refreshments. The catering manager knows about the refreshment offerings of the competitors and how the airline’s own refreshments differ from them.
 
But the problem is that customers compare airlines based on the complete package or based on the whole experience. What the catering manager is so concerned about is quite irrelevant to the customers.Or consider a CIO or Chief Information Officer who is proud of the data-mining capacity of the company’s software. He doesn’t realize that the customers mainly look at speed and user-friendliness. Data mining is the least of their concern.To not commit the same mistakes, here are the four steps of visualizing a strategy that you can adapt to your company. The first step is visual awakening. Draw a strategy canvas and see what factors you need to change.The second step is visual exploration. Go into the field and see how you can break the market boundaries. Draw the four action framework. Know which factors you should eliminate, reduce, raise and create.
 
The third step is the visual strategy fair. Draw your new strategy canvas based on your field observation. Get feedback about the new strategy from customers and non-customers. Use their feedback to polish your new strategy canvas.The fourth and final step is visual communication. Print your old and new strategy canvas on one page each. Distribute copies to the whole team so that everyone will be informed.
 
Pursue only the projects that agree with the new strategy canvas.As we learned from the previous chapter, strategy canvas shows the factors that companies invest in and how much. If you see the strategy canvas of [yellow tail] versus the premium wines and budget wines, the graph of [yellow tail] is obviously different.The same is true for NetJets and QB House.If you follow the four steps of visualizing strategy, you will not get lost in the numbers, and everyone can work together towards the blue ocean. Executives and employees alike will know clearly which factors to eliminate and create.

Reach Beyond Existing Demand

This is the third principle in formulating a blue ocean. Reach beyond existing demand by converting non-customers to customers.Red oceans tend to focus on the existing number of customers. The result is that companies design the product based on more specific needs.Instead of thinking outside the box, they go further inside the box and get stuck there. Their market share gets even smaller because there is strong competition. Red ocean companies miss the bigger opportunity.Blue oceans, on the other hand, targets non-customers because that is where the unlimited opportunity is. It makes sense, right? If you convert non-customers into customers, then you will have more profit and more space for growth.
 
There are three tiers of non-customers. The first tier is composed of soon-to-be non-customers. These people are on the edge of your market. They are waiting to jump in.The first tier only buys your products out of necessity. But if you give them a good offer, they will be converted as customers, and they will buy more often and at greater amounts.The second tier is composed of refusing non-customers. They see your product as an alternative, but they are not convinced enough to buy.The third tier is composed of unexplored non-customers. They are people who are far away from your market. They are not aware of your products.If you see the commonalities in the needs of these three tiers, then you can provide for all of them. Imagine how much growth and profit you’ll gain if you can convert all these people into your customers.
 
Below is an example of a blue ocean and how the company went beyond the existing demand.You will learn how it attracted non-customers and achieved more success.Pret A Manger is a fast-food chain in the UK. It created a blue ocean by converting first-tier non-customers. They are the restaurant-goers who don’t like fast food but who want quicker service.Professionals in major cities of Europe always go to restaurants for lunch. Dine-in restaurants offer a nice setting and quality meals. However, professionals don’t always have time. They also cannot afford restaurant meals every day. More and more people choose to take out and eat while on the run.
 
These first-tier non-customers are waiting for a better solution. They have personal preferences, but they all agree on three things. They want a quick lunch, they want healthy and fresh meals, and they want food at an affordable price. These are the key commonalities. Here comes along, Pret with the perfect solution. When you go to a Pret Store, you can choose your sandwich, pick it up, pay, and leave. The sandwiches are ready-made, but they are healthy. Fresh ingredients are delivered to the store every day.The staff always prepares sandwiches beforehand. All types of sandwiches on the menu are assembled already. They are stored on the refrigerated shelves along with the other fresh offerings like sushi, salads, fruit juices, and yogurt.
 
People can just decide what they want, pick it up, and pay. They can leave the store in two minutes. Compared to fast-food service, which is chosen, order, pay, wait, receive and eat, Pret is quicker, more convenient, and more satisfying.At present, Pret A Manger has over 130 stores in the UK. It also opened stores in Hong Kong and New York. The annual sales of Pret in 2002 were 160 million dollars. Even McDonald’s saw the great potential of Pret, which is why the fast-food giant bought 33 percent of Pret shares.

Get the Strategic Sequence Right

This is the fourth and last principle to formulate a blue ocean. It is building a strong business model which ensures good profit and reduces risk. You can draw it in a flow chart on just one page.The right strategy sequence goes like this. First is buyer utility. It refers to the value your product can give to the customers. Is there a compelling reason for many people to buy your product? Do they really need it? Will it be very useful for a large group even though they don’t know it yet?If you are not sure, then perhaps you need to think of a new idea. But if your answer is definitely yes, then you can proceed to the next step. Second, on the sequence is the price. Is the price reasonable for the value offered by your product? Will the target clients be willing to pay for it based on its use? 
 
If not, then you need to think again. If your answer is yes, then you can proceed to the third step, which is cost. Can you produce at a cost that lets you earn a good profit? Can you see the profit clearly based on the price you’ve set? If the production cost is too high, you might be low on profit margin, and that is not good. Your product is not profitable. Blue oceans are a combination of buyer utility, good price, and profitable production cost. All these factors contribute to the success of the blue ocean.Once you’re clear on the cost, the fourth and last step is adoption. These are the hurdles you might face in executing the blue ocean. Will the suppliers, retailers, or partners be okay with the idea? Is it feasible for them? Can they adapt to the new strategy?
 
Remember that the blue ocean is very different from the red ocean strategy you are used to. It is inevitable to face adoption hurdles. To better understand, here is the example of the famous car Ford Model T. It is a best-selling innovative product and a true blue ocean of its time.Before Model T, automakers in the US only produce custom-made luxury cars for rich people. These cars were not practical to use for the masses. The buyer utility is limited because of two reasons.First, it was better to use horses because the roads were still muddy and bumpy in the early 1900s. Even rich people cannot use luxury cars every day on the main roads. They were only good for leisure weekend outings. Second, because luxury cars are custom-made, they often break down. Repair is expensive, and only skilled craftsmen could fix them.
 
Ford Model T came in and removed all these utility problems at once. It became the car for the masses. Model T has only one color, which is black. It has only one standard design and no customization options. Model T is durable and reliable. It is for daily use. It can travel easily on bumpy roads, even if it’s raining or snowing. The car is easy to fix, and people can quickly learn how to drive it.The price of Model-T is significantly lower than luxury cars. That is because Ford compared its price to the horse-drawn carriages, which the majority of people used at the time. Ford wanted to convert these non-customers who don’t buy cars into customers. That’s why the company set Model T’s price as low as a horse-drawn carriage.
 
Ford was able to drop its price because of its significantly lower production costs. Model-T is not handmade by car experts from inside out. Ford pioneered the assembly line, which replaced car experts with ordinary factory workers.Each worker does the same task every day. This process ensured quality and reduced production time by 60%. One unit of Model T only takes four days to assemble. All in all, Model T achieved innovation in every stage, which is why it is such a remarkable and successful product. Ford got the strategic sequence right, and it earned incredible results

Conclusion

you learned the difference between red oceans and blue oceans. The red ocean is where all the competition is. You can create a blue ocean and have more opportunities for success.You learned about the strategy canvas and four action frameworks. The strategy canvas will give you a clear view of the current market. The four actions framework lets you know which factors you need to eliminate, reduce, raise and create.You learned about reconstructing market boundaries. Think outside the box. Break out of the limits set by your market. You also learned how to focus on the big picture. Make sure that the whole team works according to the blue ocean.
 
You learned how to reach beyond existing demand. Instead of focusing on your current customers, target the non-customers because that is where the bigger opportunity is. You learned how to get the strategic sequence right. Your business model should start with buyer utility, then price, then cost, and lastly, adoption hurdles. If you follow this sequence, your blue ocean will surely be a winner.With the success of your blue ocean, it is inevitable that imitators will enter the market space you have created. This will not happen for ten to fifteen years, but you have to be prepared. Red ocean companies will find it difficult to imitate you because they are stuck with their current business models.
 
But once you have imitators, continue to monitor your strategy canvas because you may not be aware that you’re already competing and turning the ocean red. Use the strategy canvas to know if you already need to create another blue ocean or if you can still improve, expand and get more profit from your current offering.Blue ocean strategy promotes more creativity and innovation in the business. It is the path that leads to extraordinary success. Why get stuck in the bloody competition when you can swim freely in the vast blue ocean? 

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