Blue Ocean Strategy is a marketing theory that stems from the title of a 2004 book authored by Kim and Mauborgne. In their book, Kim and Mauborgne explain why striking a balance between cost leadership and differentiation can help a digital company create a leap in its value on the market (David, 2013). “Blue oceans” in this context are unexplored market areas that this strategy helps to target. Companies that wish to adopt the Blue Ocean Strategy need to focus on the bigger picture. Kim and Mauborgne (2014) juxtapose their approach to the “red ocean” approach. The “red ocean” approach is based on environmental determinism: it suggests that the market size is limited, hence, the competition on the market is a zero-sum game. If a new company increases its market share, it does so at the expense of some other company. The Blue Ocean Strategy reframes market competition: it implies that the boundaries of the market size are arbitrary, and new companies can create “blue oceans” themselves.
A prime example of a company adopting the Blue Ocean Strategy is Apple. In the 1970s, powerful corporations such as IBM and DEC were trying to outdo each other in building industrial computers. On the market, there was a consensus that the regular customer would not have any reason to have a personal computer at home. Instead of joining the competition, Apple escaped the market and reached out to the untapped market segment. It offered customers affordable computers that they could use in their daily life. Fast forward to the 2000s, Apple beat Nokia by creating another “blue ocean.” While Nokia had a competitive cellular technology, Apple transformed its phones into mini-computers with a touchscreen, a single button, and applications.
References
David, F.R. (2013). Strategic management concepts: A competitive advantage approach. Pearson.
Kim, W. C., & Mauborgne, R. (2014). Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.