Our market universe is composed of two types of oceans; Red Oceans and Blue Oceans. Red oceans represent all the industries that are existent today i.e. market space is known whereas blue oceans represents industries that not existent i.e. market space is unknown.
Red Ocean is all about competition and competitive rules, it is about outperforming the existing competitor and sharing the greater portion of demand and supply. Market space is crowded and prospects for profits and growth is reduced. In contrast, Blue Ocean is about untapped market space, creation of demand and opportunity for highly profitable growth. In this ocean, competition is irrelevant as new rules and strategies are yet to form.
Blue Ocean Strategy (BOS), also referred to as Blue Ocean Shift, is a framework which inspires to innovate and develop new demand and new markets to sell your products instead of fighting with competitors over the same market share and satisfying same demand as Red Ocean Strategy (ROS). In BOS, there is no pricing pressure as there is low or no competition in the market. The cornerstone of Blue Ocean Strategy is Value Innovation. Value innovation equals emphasis on value and innovation. Value innovation occurs only when companies align innovation with utility, price, and cost positions. Blue Ocean Strategy is important because world is looking for creative new solutions and the market is changing. Some of the companies adapting Blue Ocean Strategies are analysed as follows:
Subway is a restaurant chain specializing in submarine sandwiches and it is one of the largest fast-food chains in the United States and one of the fastest growing fast-food chains across the globe. It started its operation in 1965, headquartered in Milford, Connecticut. As today, Subway has 43,600 stores in more than 100 countries. The brand controls 60% of the quick-service sandwich market in the U.S.
There are various fast-food chains across the U.S. and many people, back then, were aware of the fast food chains but avoided it as people believed fast-food to be unhealthy. Healthy options of fast-food chains were more expensive. Then existing fast-food chains couldn’t cater this gap.
The growth and success of Subway involves application of Blue Ocean Strategy. Value Innovation is the cornerstone of Blue Ocean Strategy. Subway has adapted this value innovation concept to excel on its business. Subway has been successful in creating value to its customers by providing fresh, healthy and nutritious delicious food at a very reasonable price. Along with it, Subway provided a unified standard in its service and provided a wide range of service to their customers. To strengthen its service, Subway also had a powerful support system. Unlike other fast-food chains, Subway prepared the order in front of the customer to reflect the freshness on its service. All this unique proposition in business helped Subway to commercialize uncaptured markets or unlocked customers. Advertisement and educating customers through its unique campaign and upper hand of Subway in utilizing tech for promotion has escalated the performance and growth of the company.
Subway more than tripled its U.S. sales from $3.1 billion to $11.5 billion from 1998 to 2011. In 2019, Subway value hit $12.3 billion and is one of the fastest-growing businesses.
Zara is one of the biggest international fashion companies which is owned by Inditex Group. It was founded in 1974. Rosalia Mera and Amancio Ortega founded this company and it is headquartered in Arteixo. This clothing retailer has more than 3,000 stores across the world and is present in 96 countries. Zara registered $3.9 billion profit in 2018.
Zara is another company that has followed Blue Ocean Strategy. Zara has been able to decode the mantra of the fast fashion apparel industry with the help of its strong supply chain management. Zara became a quality apparel brand with reasonable prices. Zara has always been a leading brand when it comes to pulling customers towards the brand unlike other apparel brands. Zara is among the leading companies to cash in the rapidly changing fashion trends i.e. Zara filled this gap in the apparel industry i.e. keeping the pace with latest fashion trends and providing high quality yet affordable prices. With full control over its supply chain, Zara is able to create new designs and put them into stores in weeks.
Also, Zara believes less in advertising and endorsement policy rather Zara invest certain percentage of its revenue in opening new stores and serving customers by showing the existence. Zara has been a brand for Fast Fashion, which was new and untouched when Zara started.
3. Reliance- Jio:
Any firm following the Blue Ocean Strategy must have greater intellectual power or financial leverage to render the existing product irrelevant. Reliance Jio is the one of such firms with Blue Ocean Strategy.
Reliance Jio Infocomm Limited, established in 2010, is an Indian Telecommunication company wholly owned subsidiary of Reliance Industries. Reliance Jio is the biggest example of Blue Ocean Shift in India. Jio created Blue Ocean Shift by:
- 1. Investing a massive sum of $40 billion in the telecommunication sector in India in newly established 4G/5G LTE technology.
- 2. Jio reduced price per GB due to the massive technological advancement which derived the data revolution in India.
Now, Jio has 370 million subscribers and is business worth Rs. 5,026 crore. Reliance Jio has been their regular strategy of thinking big and delivering something that neither customers nor even competitors can ever imagine.
Power of Economies of Scale is another feature in Blue Ocean Strategy. Walmart is the exemplary firm when it comes to economies of scale. Walmart revolutionized the business of grocery shopping. In FY 2020, Walmart recorded the revenue of $524 billion and it continues to be a leader in retailing business. Walmart was founded in 1945 and is headquartered in Bentonville.
Walmart uses the power of their Massive Investment size to heavily discount products and to pass on the benefits to customers. This allows selling goods at such a low cost setting apart from the competition. Integration of required technology in retail stores allows them to track their inventory levels and order products as soon as they are low on stock of daily supplies. Along with it, excellent logistics and supply chain management are also practised by the company.
5. OYO Rooms:
Ritesh Agarwal, founder of OYO Rooms, revolutionized hotel hospitality in South East Asia and is the world’s third-largest and fastest-growing hospitality chain. OYO Rooms portfolio includes 43,000 partnered hotels and over 1 million rooms. OYO Rooms success can be attributed to the execution of Blue Ocean Strategy.
Value Innovation is one of the important concepts in Blue Ocean Shift. OYO Rooms provided a 3 star hotel hygiene and environment at very reasonable cost. OYO’s value innovation is to eliminate fancy aspects but retain hygiene and predictability in the hospitality sector. OYO provided hotel facilities with free Wi-Fi, breakfast, flat screen TVs, spotless white bed linen, branded toiletries etc. to the customers at a reasonable price. Rather than competing in the existing hospitality trend, OYO differentiated its service with an innovative approach to hotel rooms. OYO branded all the partnered hotels and marketed it well. The Couple Friendly room concept was another innovation to attract customers and extend the scope of the service.
OYO Rooms has positioned itself as an aggregator brand rather than a traditional hotel chain. OYO has been able to unlock value for customers and has been an excellent example for introducing innovation to hotel chains. It is another successful example of Blue Ocean Strategy from India.