Business strategy

Blue Ocean Strategy

Strategy Canvas

Blue Ocean Strategy is a “ approaching companies to get out of the highly competitive Red Ocean ” strategy. And specifically, “ creating a non-competitive market, Blue Ocean, and making competition meaningless “.
In the first place, Blue Ocean is a word that means an undeveloped market without competition.
Therefore, the Blue Ocean Strategy is to create Blue Ocean by focusing on “value innovation”, grasping the potential value that customers want, and providing new value through products and services. It can be called a business strategy.
In addition, Blue Ocean is a strategy that enhances the value of products for customers and at the same time realizes low cost, which makes it possible to differentiate from competitors.
Value innovation is a term that means a state in which the value of a product to a customer is increased while reducing costs, and the value of both the company and the consumer is increased at the same time.
In the Blue Ocean Strategy, we will utilize various analyzes and frameworks to verify the feasibility of value innovation.

 

 

Origin of Blue Ocean Strategy

The Blue Ocean Strategy is a concept advocated by INSEAD’s W. Chan Kim and Renee Mauborgne.
Kim and Mobornu advocated new value by “reducing / removing” excess products from rival products and companies, and “increasing / creating” insufficient functions and values ​​that can be expected by customers’ potential needs. Is to create. By changing the axis of traditional competition, it will be possible to do business without rivals even in existing markets.
The Blue Ocean Strategy is an evolution of Michael Porter’s strategic theory of maintaining a lasting advantage in the highly competitive market (Red Ocean). Porter advocated a alternative strategy of either “differentiation” or “low cost”. On the other hand, in the ERRC grid (described later) of the Blue Ocean strategy, the ER on the left side is the cost and the RC on the right side is the element of discrimination, so it is possible to pursue two at the same time.

 

 

Red Ocean Strategy and Blue Ocean Strategy

Red Ocean Strategy Blue Ocean Strategy
Compete in existing markets Create a competitive market
Win the competitors Make competition meaningless
Gather existing demand Discover new demand
There is a trade-off between value and cost Increase value and reduce cost
Choose either a differentiated or low-cost strategy to align your business activities Pursue both differentiation and low cost and promote all corporate activities for that purpose

The Red Ocean Strategy is a management strategy that has the opposite meaning of the Blue Ocean Strategy. The Red Ocean Strategy is a strategy to expand our market share in a market where competition is already intensifying (development market), not in Blue Ocean where there is no competition.
The Red Ocean Strategy focuses on how to survive in industries and existing markets where competition near attrition is intensifying, such as excessive competition between competitors, low profit and high sales, and low value-added products. .. Companies with large capital are advantageous because “economy of scale” is easy to work.
If a competitor succeeds in Blue Ocean, one of the typical strategies is to imitate the business model and homogenize the differentiating strategy implemented by the competitor to transform it into Red Ocean.
 

 

Why is the Blue Ocean Strategy Necessary?

Because technology has evolved

Today, we are changing to an era where we cannot live without the Internet. In a lifestyle that constantly creates new value and improves convenience, the barriers to entry into the technology industry, which was previously difficult to enter, have been lowered, and it has become easier to reach the customer user base, which was difficult to approach. rice field.
As a result, many companies are now in an era where it is easy to discover Blue Ocean, and it is easy to challenge new areas without entering the existing market.
 

 

Because it changed in an era of uncertainty

In today’s world of technological development and increasing management uncertainty, user values ​​are becoming more diverse and business challenges are becoming more complex. Due to this complexity, it has become difficult to guarantee long-term sales and profits only in specific existing markets as in the past, and it has become necessary to search for new value markets.
Therefore, it is necessary to voluntarily discover Blue Ocean, which has no competitors, to develop its own original brand, and to secure sales and profits from high-value and low-cost products and services.
 

 

ERRC Grid and Strategy Canvas for Developing Blue Ocean Strategy

We use the “ERRC grid” and “strategy canvas” when formulating a business model with the background of the Blue Ocean strategy.

ERRC grid

Eliminate Increase (Raise)
What are the factors that the industry has been competing for for many years and should be removed? What factors should be increased compared to industry standards?
Reduce Imagine (Create)
What factors should be reduced compared to industry standards? What is the value that has never been offered in the industry, or is it something that should be newly created?

Strategy Canvas

Strategy Canvas
Similar to the ERRC grid, the “Strategy Canvas” is an effective framework for formulating the Blue Ocean strategy.
In the Blue Ocean Strategy, we first analyze the market using the “Strategy Canvas”. The horizontal axis shows “points that industry companies are focusing on to acquire customers”, and the vertical axis shows “degree of value that customers can obtain”.
Create this graph with the patterns of “own company”, “industry standard”, and “competitor”. Then, you can understand the situation of the industry and your company.
The curve of the graph is called the “value curve”. Based on this curve, we will consider how to create a value curve that does not overlap with other companies.
In order to create a value curve that is different from that of other companies, it is possible to simply “look at industry standards and the value curves of other companies and focus on the points that each industry company has overlooked.” However, you may come to the conclusion that there is nothing you have missed.
 

 

 

 

6 Tips for Creating a Blue Ocean

The Blue Ocean strategy focuses on people who are not currently using products or services in their industry, rather than existing customers. Specifically, “people who are reluctant” who have low willingness to purchase and are substituting with other products, “people who are determined not to use” who are dissatisfied with the products of the current industry, etc. It is roughly divided into three types: “people who are far from the market” who do not use alternatives. After organizing it, we will consider how to attract people other than this customer as new customers.

Learn from alternative industries

Consider alternatives to the products offered by your industry and ask, “Why are you choosing that alternative over yours?” In the aviation industry, there are examples such as “Why do you use the Shinkansen or your own car instead of an airplane?”
In the Blue Ocean Strategy, there are cases where the success rate is increased not only by competing with similar products within the industry, but also by verifying whether alternatives are possible for different industries with no experience.
Even if the products offered are different, they can be replaced by consumers, and attractive products can establish a competitive advantage even if the products are unprecedented. I can do it.
In addition, services that can complement the functions and values ​​of existing products are also effective services under the Blue Ocean Strategy. In order for the Blue Ocean strategy to be successful, it is also important to verify whether the company’s technology and strengths can be an alternative industry in different industries, and whether a business model can be established as a complementary service.

 

 

Learn from other strategic groups in the industry

Investigate the reasons why you are choosing another company’s product over your own, such as “because it has a lot of functions”, “because it has its own service”, and “because it is simply cheap”.
 

 

Focus on consumer groups

Often there are multiple groups of consumers. The choice of consumer group (customers and markets) is an important process not only for blue ocean strategies but also for marketing strategies.
Different groups of consumers tend to demand different values ​​for the same product. In addition, with the passage of time and the development of technology, consumers are now able to obtain products that were previously used only by corporations. Therefore, it is necessary to grasp the trends in the world, anticipate how the industry as a whole will change, and point out changes in the products provided by companies.
In this way, in the Blue Ocean Strategy, it is important to grasp the trends of the times and the development of technology, increase the choices of consumer groups, create new value according to the consumer, and provide it to the market. ..
In the case of auto parts manufacturers, there are finished vehicle manufacturers, dealers, end users, and end user families. Focus on all of them, and focus on the buyers who neglected them.

 

 

Understanding complementary goods and services

Taking a car as an example, people who buy a car don’t just buy it. We also purchase products that complement functions such as car navigation systems, fragrances, and cushions. Check the products that play such a complementary role and consider whether the function can be realized in the current product.
 

 

Switch between function-oriented and sensitivity-oriented

Companies that provide products and services, as well as customers who buy them, tend to be dominated by a single value. However, the Blue Ocean Strategy creates the possibility of acquiring new customers by converting the value given to products and the like.
Generally, the value given to a product or the like has either or both of “function-oriented” that emphasizes advanced technology and rationality and “sensitivity-oriented” that emphasizes appearance and comfort. Focusing on one of these will create a differentiating factor, and customers will become fans of the product and establish it as a highly sustainable business. Many industries are biased towards one or the other, so look at the opposite of that industry’s biased orientation.
On the other hand, it is also effective to switch from one of the orientations that was a factor of discrimination to the other. In this way, the Blue Ocean Strategy has the potential to create new markets and acquire new customers simply by changing or adding to existing products.
 

 

Anticipate the future

We anticipate major movements that will affect the industry. Apple, for example, noted the widespread use of illegal music downloads.

We take the above approach, and based on the results, we will consider an original value curve that other companies do not have. Specifically, the ERRC grid allows you to discover the Blue Ocean and reborn your products and services. This is called value innovation .
 

 

Benefits of Blue Ocean Strategy

High unit price and low cost can be sold

One of the biggest benefits of the Blue Ocean strategy is the ability to sell your products to the market at high unit prices and low costs.
Since there are no competitors in the target market of Blue Ocean, the company can have the right to decide the price in the market and can provide products that are advantageous to the company. Also, unlike Red Ocean, there is no risk of price competition between competitors, so stable profits can be expected.
You can also eliminate the threat of new entrants by securing pricing rights at Blue Ocean. Realizing low-cost product offerings relies heavily on unique distribution and sales channels. By maximizing your existing strengths, you will be able to build a profit-enhancing model that your competitors cannot imitate.
 

 

Economies of scale can be utilized

Long-term strategies and measures are needed to maintain a competitive advantage in Blue Ocean. Therefore, Blue Ocean is an easy market to utilize economies of scale.
Economies of scale is the “economic effect of increasing average costs and improving profitability due to increased production,” and is also called economies of scale.
By leveraging economies of scale, you can achieve both low cost and increased customer value in a short period of time, so you can respond quickly to the strategies of your competitors.
The Blue Ocean Strategy is a strategy that realizes cost reduction in addition to the differentiation strategy used in the Red Ocean Strategy. Therefore, even if a competitor implements a differentiation and homogenization strategy, it is possible to simultaneously develop its own cost reduction strategy that utilizes economies of scale, and it is possible to maintain a competitive advantage.
When implementing a Blue Ocean strategy, it is important to verify that you have a financial base that can take advantage of economies of scale.

 

 

Long-term growth can be expected through brand development

The Blue Ocean Strategy is a strategy that creates new value and creates the possibility of acquiring new customers. Therefore, the Blue Ocean Strategy is an effective strategy for probabilizing new products in the market and raising awareness.
By quickly grasping the needs and conveniences of potential consumers that no one has paid attention to and providing them to the world, it will be recognized as an excellent brand for a long period of time and will be cultivated as an intangible asset (brand equity). There is a merit that you can do it. Building a brand can be expected to reduce the effectiveness of the differentiation and homogenization strategy of similar products, and to create a customer base that will continue to purchase.
 

 

Disadvantages of Blue Ocean Strategy

Requires advanced marketing knowledge

The Blue Ocean Strategy is premised on adding high value to products. However, it is difficult to succeed in the Blue Ocean strategy with sales and technical capabilities alone.
The Blue Ocean Strategy is one of the marketing strategies, and in order to implement an effective strategy, it is necessary to have advanced marketing knowledge to analyze the competitive factors surrounding the company.
Personnel involved in the Blue Ocean Strategy, such as managers and personnel, must have the minimum necessary marketing knowledge and knowledge of the strategic campus and frameworks such as the ERRC grid necessary for formulating the Blue Ocean Strategy. Is important.
 

 

Products and services are easily imitated

Blue Ocean strategies often do not require innovation through innovation. The Blue Ocean Strategy is easy to work in favor of large companies with abundant management resources, but on the other hand, it may take a short time to be imitated, and it may quickly lose its competitive advantage.
Therefore, when implementing a blue ocean strategy with existing products, it can be said that it will be difficult to receive long-term benefits unless we continue to focus on formulating a differentiating strategy that is difficult to imitate and creating new value. ..
 

 

Innovation is likely to occur

In recent years, innovation has reduced barriers to entry and the emergence of alternatives has become commonplace. As a result, the market share is increasing due to the easy entry of other industries, and it is becoming difficult to maintain the Blue Ocean.
In addition, since the Blue Ocean Strategy is a strategy that requires long-term investment, measures, and huge capital investment, there is a risk of incurring unexpected losses due to innovation. With products provided by start-up companies such as IT companies all over the world, Blue Ocean instantly becomes Red Ocean, and the number of long-established companies in a difficult situation is increasing.
Therefore, when implementing a Blue Ocean strategy, it is necessary to anticipate possible innovations, uncover markets that no one has found, and consider all possible countermeasures against the threat of new entrants.

 

 

Example of Blue Ocean Strategy

QB House

QB House, which opened its first store in Tokyo, Japan in 1996, is a haircut specialty store operated by QB Net. We are developing chains in small spaces such as premises of major profits and office buildings. It has grown rapidly since the service started in 1996, and has expanded to about 600 stores in Japan and about 140 stores outside Singapore, Hong Kong, Taiwan, and the United States.
QB House has largely removed the services that were common in traditional barber shops and beauty salons, and focused on the benefits of “dressing hair in a short time.” Also, the value offered by the store is not to make a new hairstyle, but to “do not cut too much hair while maintaining the current hairstyle”. With these mechanisms, it takes about 10 minutes to cut the hair. Almost no reservations or waiting times are required. Since the turnover rate of customers is high, it is possible to generate profit even with a cut fee of about 1000 yen.
The Blue Ocean Strategy creates competition with latecomers when the barriers to imitating new products and know-how are low. In this regard, QB House has avoided competition with other companies by developing its own unit-type equipment that can perform hairdressing work in a narrow space called an “air washer” and a “system unit” that cleans cut hair. ..
In addition, the Blue Ocean Strategy uses the “Strategy Canvas” to compare the competitive factors between the company and its competitors and the degree of benefits that customers enjoy.
& nbsp;

QB House’s ERRC grid

Eliminate Increase (Raise)
・ Haircut to suit your personality
・ Comfortable store space
・ Do not create waiting time
・ Low price
Reduce Imagine (Create)
・ Necessity of reservation
・ Shampoo and blow
・ Shaving
・ Adjust your hairstyle in a short time

 

RIZAP

RIZAP, a Japanese company of personal training gyms that has become famous for its impressive advertisements that surely fulfill the desired weight, is a latecomer company that started its business in the 2000s. RIZAP does not have the luxury facilities such as pool, jacuzzi and bar offered by a fitness club with the same membership fee. In addition, detailed guidance such as nutritional guidance and exercise methods at home is inferior to that of competitors.
However, the most important thing that RIZAP offers is coaching guidance that keeps you running alongside your customers until you reach your goals. The president of health Corporation, which is run by RIZAP, says, “Facilities and equipment are imitated, but know-how to achieve the goal is not imitated,” and we are providing the current value.
 

RIZAP ERRC grid

Eliminate Increase (Raise)
・ Studio equipment
・ Equipment such as Jacuzzi
・ Nutrition guidance
・ Exercise guidance at home
・ Training in a private room
Reduce Imagine (Create)
・ Facilities such as pools
・ Services such as towels and clothing
・ Trainer coaching skills

 

Southwest Airlines

Southwest Airlines is an American low cost carrier founded in 1967.
At that time, businessmen traveling between local cities in the United States used coaches. The founder of Southwest Airlines wanted to set up an airline that could travel at about the same fare as a bus.
Whereas traditional airlines offered luxury in-flight and flight tendant courteous service, frequent meals, etc., Southwest Airlines has provided a whole new service.

  1. Reduce mistakes and improve efficiency by unifying models and in-flight layouts and training pilots and mechanics in a short period of time.
  2. Reduce costs by conducting FA training in areas where labor costs are low, using airports with low airport charges in the suburbs instead of large cities.
  3. Charged service by providing in-flight meals, luggage storage, and seat selection as paid options.
  4. The number of seats is increased by narrowing the space between seats, and the FA also cleans the cabin so that it can take off immediately after landing and increase the turnover rate.

As mentioned above, we have made all kinds of cost cuts and realized low-priced flights that could not be realized by conventional airlines.
Low-cost carriers are already expanding worldwide.

 

 

Cirque du Soleil

Cirque du Soleil is a Canadian-based company that is an entertainment group that holds performances in Japan and around the world.
Cirque du Soleil does not focus on animal performances like the conventional circus, but adopts elements such as ballet and theater in the performance and gives the performance a story, as an “art”. Created a position. Through these activities, the audience accepted the price much higher than the circus, and it became famous as a successful example of the Blue Ocean strategy.
 

 

Nintendo Wii

The game console “Wii” developed by Nintendo is a product developed by Nintendo utilizing the “Blue Ocean Strategy”. Until now, game consoles have set their main customers to “late teens,” and were Red Oceans competing for this customer base.
Against this background, Nintendo has developed a game that is easy to remember and handle, with the hope that “I want other age groups to play the game as well.” The game console was the “Wii” that incorporated the movements of sports such as golf and tennis in the real world. As a result, Wii has become a national game leader with sales of 101.63 million units.

 

 

UNIQLO

The most successful Japanese company in the Blue Ocean strategy is UNIQLO, an apparel maker. UNIQLO’s popular product, “Heat Tech,” boasts a high level of functionality not found in previous clothing. With a method called “SPA” that consistently performs the process from manufacturing to sales, we have succeeded in cutting costs related to distribution, purchasing, and purchasing, and providing them to users at low cost. Furthermore, while discovering new markets, we provide users with a wide range of products such as “silky dry” in the summer and gloves and knit products suitable for heat tech in the winter.
 

 

Success conditions for Blue Ocean Strategy

Can you change the axis of competition?

In order for the Blue Ocean strategy to be successful, is it possible to understand the “excessive functions” and “missing functions” of existing products and services and create value that is different from that offered by rivals? It’s the key.
 

 

Can you create a unique function with a high imitation barrier?

If you can’t create equipment or mechanisms that are difficult for other companies to imitate, such as QB House’s “Air Washer” or RIZAP’s “Coaching Skills,” or that require special knowledge, your business can easily be imitated.
 

 

Is there a need for the value that your company provides?

As the phrase “blue ocean has no fish” suggests, it is difficult to generate revenue with too special features or very few needs. You can succeed as a business if you find the value that doesn’t exist now, but many people want , but at the same time, you need to carefully judge the sustainability of your needs.
 

 

 

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