Blue Ocean Meaning in Business
Blue ocean is a business strategy that looks to create an uncontested, unexploited market space for a product. It encourages finetuning your products so they can create their own market devoid of competition. The use of the term ‘blue ocean’ to refer to uncontested market gaps contrasts with ‘red ocean’, a depiction of the cutthroat competition in saturated markets swarming with formidable competitors.
Blue oceans are characterized by:
- Absence of competitors
- First mover advantage for the company.
- Low marketing costs due to the absence of competition.
- Freedom to set prices without considering competitor action.
- Flexibility to move the product in different directions.
Blue ocean was first formally used in the book Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant written by Renee Mauborgne and W. Chan Kim.
To deploy a blue ocean strategy, identify market gaps, pain points and other untapped opportunities that only your product can address. The goal is to combine high product differentiation with low cost. The blue ocean strategy is most useful when product supply in a market exceeds demand. Blue ocean companies tend to be the pacesetters and innovators of their era. Examples of companies and products that implement blue ocean strategies include Uber, Netflix and Apple’s iTunes.
There are some drawbacks in adopting the blue ocean approach:
- It can be overly ambitious and hard to implement.
- It can be risky and may not work if the actual market size turns out to be too small to be profitable.
- The blue ocean may not last long and could quickly become a red ocean.