Blue ocean strategy is the term used in the context of marketing; it refers to that strategy in which the company tries to find a completely new market or create new demand for the existing product so that product of the company can be marketed easily due to less competition which in turn gives company pricing power or monopoly. In order to understand more about this concept, one should look at some of the advantages and disadvantages of the blue ocean strategy –
Advantages of Blue Ocean Strategy
Less Competition
The first and foremost advantage of the blue ocean strategy is that if the company can find a new market then it does not have to worry about competition because the main emphasis of this strategy is to find an untapped market and thus remove the scope of any competition. In simple words suppose there are two movies one movie is filled with action and comedy having lots of entertainment and another movie is a serious movie with the social message than chances are you will easily get a ticket for the second movie without much effort while as far as 1st movie is concerned chances are you may not get the ticket due to the show being houseful, same is the case with blue ocean strategy where company can find markets like a serious movie and ignore the markets like entertainment movie.
Higher Margin
Another benefit of this strategy is that company can charge higher prices for the product due to lack of any competition and hence enjoy a higher margin for a long period of time until the competitors arrive in the market. In simple words when the company can generate a new market or new demand for the existing product then it can charge a higher price as there are no comparable products and the company can enjoy a higher margin as long as customers are happy with the company’s product.
Less Stressful
Another benefit of blue ocean strategy is that since there is no competition company is not in a constant stress on how to handle competitors and hence the primary task of the company is to create an attractive product for its consumers and ensure that consumer is satisfied with the product. In simple words just like a student who is having exams will not be successful if he or she is distracted by partying or watching television in the same way a company cannot be successful if focuses more on its competitors rather than its product.
Disadvantages of Blue Ocean Strategy
Difficult to Find
The first and foremost disadvantage of the blue ocean strategy is that it is very difficult to find markets that are devoid of any competition at the same time having the potential for good sales and profit margin. In simple words, just like in today’s world where due to pollution it is difficult to find a clear Blue Ocean in the same way in the age of cut-throat competition it is difficult to find a market that has negligible competition.
Less Success rate
Another problem with the blue ocean strategy is that chances of success are less as this strategy involves experimenting with products as well as markets and we all know that experiments have a low success rate. In simple words, companies having enough resources can try to do this experiment because of the inherent risk associated with the blue ocean strategy.
Competition at Later Stage
If the company is successful in the blue ocean strategy then initially it will face no competition but as product and market become big the competitors enter and the company loses the competitive advantage. In simple words, unless there are strong barriers to entry the company will not be able to enjoy pricing power for long due to competitors entering the market and reducing the profit margins of the company.
As one can see from the above that blue ocean strategy has advantages as well as disadvantages and that is the reason why any company thinking of adopting this strategy for its products should carefully read the above points and then only should go ahead with implementing this strategy for the company’s products.