Blue ocean strategy was advanced by Chan Kim & Renée Mauborgne in the year 2004. This strategy emphasises on creating and exploiting uncontested market spaces. In other words, it makes competition irrelevant since a firm moves into new market segments that never existed before that are characterised with zero competition. Applying this strategy requires a firm to not only create new products but also differentiate the existing ones that water down the competition.
The authors of this strategy coined two critical terms namely the ‘Red Oceans’ and the ‘Blue Oceans’. The Red Oceans refers to today’s industries that are associated with cutthroat competition. Market players in such an environment pursue price-cutting strategies that threaten profitability. Besides, they increase their marketing budgets aimed at increasing their influence that equally reduces profitability. Such an environment threatens growth and profitability as players strive to compete for a limited market.
According to the strategy’s authors, businesses should create new demands leading to uncontested markets referred to as the ‘Blue Oceans’. Many unexploited industries can be tapped by firms thus helping them evade the adverse outcomes of competition. Blue ocean strategy is pegged on differentiation and product development that seeks to create new demand and satisfy the new needs. Apple is a living example of a company that created a new demand thus gaining a long-term advantage.
Blue Ocean Strategy at Apple
It is worth noting that creating new markets attracts competition in the long-run. For instance, when Apple was launching the first iPhone in the year 2007, the smartphone market was untapped. The company was, therefore, able to benefit from the first mover’s advantage leading to a large market share and formidable customer loyalty. The iPhone launch was followed by other phone manufacturers introducing similar products. As per the year 2018, Samsung was controlling around 20% of the smartphone market share while Apple’s market share was around 13% ranked position three after Huawei whose market share is 14.6%. It is worth noting that the company has in the past ten years remained among the top three leading smartphone vendors. It is ostensible that the strategy enabled Apple to have a sustainable footprint in the smartphone market.
Can Blue Ocean Strategy Replace Porter’s Generic Strategies?
The blue ocean strategy is more modern compared to Porter’s generic strategies. There has been a debate on whether this strategy makes Porter’s competitive strategies irrelevant. The three main Porter’s competitive strategies are differentiation, cost leadership, and focus. A close study of the most successful companies shows that Porter’s generic strategies are crucial and have enabled businesses to grow and increase profitability. In other words, the application of generic competitive strategies can give a firm a sustainable competitive advantage. It is, however, essential to combine these strategies with the blue ocean strategy to enable a firm to sustain growth and profitability in the face of stiff competition.