W. Chan Kim and Renee Mauborgne’s work, Blue Ocean Strategy, differentiates blue ocean strategy from red ocean strategy to argue the merit and superiority of the blue ocean strategy. Red oceans are defined by an industry with crowded market space resulting in a bloody, cutthroat competition of reduced profits and growth. Blue oceans, however, are defined by “untapped market space” created by expanding existing industry boundaries to reach new levels of profit and growth. Blue oceans are increasing necessary because of increased competition from globalization and every day low prices.
The underlying theme of blue ocean strategy is “value innovation.” Value innovation is defined as, “creating a leap in value for consumers to create new market space.” It is achieved by the alignment of utility, price and cost. Rather than seeing low cost and great value as a trade-off, blue ocean strategy drives costs down while driving value up.
A good strategy is defined by three characteristics, focus, divergence and a clear tagline. A good strategy focuses on a small set of factors rather than competing across all factors. Cirque de Soleil focused on drama and theatre rather than the traditional circus that focused on animals and star performers. A good strategy diverges itself from the traditional competition by looking across alternatives. Yellow Tail Wine differentiated itself from other wines by bringing in factors traditionally seen in the cocktail market. The wine was created to be simple and fun. Lastly a clear tagline that delivers a truthful promise to the consumer makes the brand easy to conceptualize.
