The blue ocean strategy in marketing is an approach to building a customer base looks to build an entirely new market segment that does not currently exist with other firms. Perfect competition consists of a myriad of competitors in the same industry that are fighting with each other over their slice of the market by offering similar products or substitute products for innovations that already exists. A “red ocean” describes a marketplace where firms are rigorously competing with each other simply to gain a greater percentage of consumers within the existing marketplace. The Blue Ocean Strategy argues that innovative companies will advance, not by battling competitors, but by strategically creating “blue oceans” of uncontested market space seeking growth (Kim & Mauborgne, 2004). Importance of the Blue Ocean Strategy
Businesses are constantly searching for new ways in which they can better contend with their competitors. The rapid growth of technology and globalization has increased the importance of a blue ocean strategy in recent years. The theory behind the blue ocean strategy is not to outperform the competition in the current industry, but to create a blue ocean or new market space, making the competition insignificant. The blue ocean strategy contends that firms will achieve greater benefits in the marketplace if they seek ways find a space in the marketplace that is free of competition and in which they will be competing only against themselves Marketers build an entirely new product or service that is currently unknown to consumers while also pursuing low cost and product differentiation at the same time (Kim & Mauborgne, 2004). Blue Ocean Product Example
A firm that broke away from the competition and used the blue ocean strategy to introduce a new product and service into the marketplace is Apple, Inc.’s introduction of iTunes and the iPod. Steve Jobs, former CEO of Apple, Inc., has always been considered a pioneer in the technology industry. He had a knack for creating products that was different and innovative over anything else available in similar industries. At the time when the only access to digital music on the Internet was through piracy sites, such as Napster, Mr. Jobs created an alternative that was acceptable to both music producers and music consumers when he introduced iTunes to the marketplace in 2003. iTunes procured the means of acquisition and distribution to offer legal, easy-to-use and flexible à la carte song downloads. This innovation allowed buyers to freely browse and listen to thirty-second samples prior downloading an individual song or an entire album.
By allowing people to buy individual songs at reasonable prices, iTunes created an remarkable solution to a key customer annoyance plaguing the music industry where customers were forced to purchase an entire CD when they wanted only one or two songs from that CD (Brooks, 2013). Apple’s strategy was also unique in that the success of iTunes fed into yet another blue ocean product offered by Apple, Inc.: the iPod. The iPod is a portable music player that allows users to upload thousands of hours of music onto a small, handheld device. Not only were people able to upload music from their existing CD library into iTunes, which could then be transferred to their iPod, but they could also download music from the iTunes store and transfer new digital purchases onto their iPods (Brooks, 2013). The Red Ocean of Digital Music
Since the introduction of iTunes and the iPod, many other technology companies have followed Apple’s innovation by offering substitute MP3 and MP4 players. Today, most smartphone devices allow users to upload their digital music to their devices, regardless of the format. A number of other distributers offer digital music and video downloads, such as Amazon, Spotify, Rhapsody. However, while substitutes to iTunes and the iPod have been introduced to the marketplace, iTunes remains the number one online music store for downloading songs (About.com, 2014). The red ocean strategy has been successful for competing firms for portable music players in that most people now use their smartphones as their portable music devices.
Since Apple, Inc. no longer holds the top spot in the smartphone industry, other firms have benefited from Apple’s iPod innovation as people merely use their smartphones as their portable music devices due to the “all-in-one” convenience of the smartphone. While a red ocean strategy is stunted by the boundaries of marketplace competition in its varying states, it does have its advantages in that firms are able to offer products the public already knows they want. With a blue ocean strategy, it is necessary to thoroughly educate the public about a new product or innovation in order to gain interest and confidence, which takes time and can require a substantial cost to market the new product. However, once the word spreads about a blue ocean innovation, the new product will be positioned in point that provides no alternatives and allows much more effective branding tactics for utilization (Kim & Mauborgne, 2004). Conclusion
All industries compete on many levels and all around the globe. While the competition is fierce in the red ocean, the world is still advancing and evolving. Such constant evolution means there will always be opportunity for blue ocean strategies in the marketplace. As blue oceans open and competitors react to take advantage of the new opportunities, the oceans do not stay blue forever and will eventually be swallowed up again by red oceans. However, the blue ocean strategy remains a necessity within the marketplace as markets within red oceans die out as well and companies must find new innovations to continually feed the need for competition in industry marketplaces.
About.com. (2014). Best online music stores for downloading songs. Retrieved from http://mp3.about.com/od/digitalmusicdelivery/tp/topmusicstores.htm Brooks, Ian. (2013, June 10). Apple, bobbing along in its own Blue Ocean Strategy space. Cake Solutions Limited. Retrieved from http://www.cakesolutions.net/companyblogs/2013/06/10/apple-bobbing-along-in-its-own-blue-ocean-strategy-space Kim, W. C., & Mauborgne, R. (2004). BLUE OCEAN STRATEGY. Harvard Business Review, 82(10), 76-84.