Blue Ocean Strategy recognizes that industry and market boundaries exist only in the manager’s minds, practitioners of such a strategy do not let existing industry assumptions limit this thinking. The challenge is not to grab a bigger share of the market but to create a bigger market. Extra demand is out there, largely untapped. The crux of the problem is how to create it. It is about increasing the size of the pie, instead if getting a bigger slice of the existing pie. Blue Ocean Strategy is about creating new wealth, instead of capturing and redistributing existing wealth in the market.
Prospects in most established market spaces—red oceans—are shrinking steadily. Technological advances have substantially improved industrial productivity, permitting suppliers to produce an unprecedented array of products and services. And as trade barriers between nations and regions fall and information on products and prices becomes instantly and globally available, niche markets and monopoly havens are continuing to disappear. The result is that in more and more industries, supply is overtaking demand. This situation has inevitably hastened the commoditization of products and services, stoked price wars, and shrunk profit margins. As brands become more similar, people increasingly base purchase choices on price.
One result of this has been the rising exodus of jobs to low cost countries like India and China as companies increasingly engage in outsourcing. While governments may seek to solve the issue of outsourcing through legislation, history teaches us that this is not a long-term solution. The long-term solution to creating jobs is in companies creating compelling products and services that take them out of the vicious cycle of commodity competition. This means moving companies’ products and services from the red ocean to the blue ocean. These issues alone make blue ocean strategy a rising imperative in today’s business environment.
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