W. Kim Chan and Renee Mauborgne in their book titled Blue Ocean Strategy in 2005 explained how a company can eliminate competition and create its own demand. In any in industry there is a cut throat competition, every firm is trying to capture a bigger market share. This Situation is RED OCEAN situation. A BLUE OCEAN situation is a situation when a firm in the industry don’t compete with its rivals but tries to get one step ahead by creating product in such a way which has never been done before by any company in the industry.
By exploring the untapped market and creating a new demand any firm can earn huge amount of profit without competing directly with another companies. Let us take an example to get a deeper insight into the concept.
In PC gaming there are two giants- 1. SONY Play Station 2. Microsoft Xbox. These kind of gaming requires high speed processors, upgrading game consoles, high definition graphics, high disk storage capacity etc. and are targeted to youth only. these youths are too males. it was very difficult to compete with these giants, Nintendo another gaming firm came up with new idea. The company introduced its WII game console following Blue Ocean Strategy. It didn’t require high definition graphics, came up with friendly user interface and with a very low cost.
So, by using blue ocean strategy Nintendo captured a nice share of the market, existing as well as potential buyers. from children to grandparents,people at every age could enjoy gaming.
Blue Ocean Strategy consist of four stages :
- ELIMINATE : eliminating those factors which has been competed for so long by rivals.
- REDUCE : reduce certain factors to below industry standard.
- RAISE : which factor should be raised above industry standard.
- CREATE : which factors should be created that the industry has never offered.