What is Blue Ocean Strategy? Distinguishing it from Red Ocean

In the current economic context in Vietnam, market domination is a big challenge for businesses. Some companies apply the Blue Ocean strategy to exploit niche markets and create a monopoly position. So why is the Blue Ocean strategy prioritized by many businesses? Let's find out with 1C Vietnam in the following article.

1. What is blue ocean strategy?

Blue Ocean Strategy is a business approach that focuses on exploring and expanding new markets, providing products and services that have never existed before. The special feature of the markets in this strategy is that there are very few or almost no competitors.

Proposed by W. Chan Kim and Renée Mauborgne in the book “Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant” in 2005, Blue Ocean strategy has the following outstanding characteristics:

• Customer focus: This strategy prioritizes customer needs and wants, creating new value and products that are different from what is currently available in the market.
• Avoiding direct competition: By creating new market space, this strategy helps businesses avoid price wars and minimizes the risk of competing directly for market share.
• Product differentiation: Create unique products or services that provide added value to customers, helping the brand stand out among existing products.
• Create new value: Deliver value that competitors cannot provide, helping businesses create a pioneering position in new market spaces.
• Flexible adjustment: Blue Ocean strategy is able to adapt to changes in the market and customer needs, helping businesses maintain a competitive advantage.

2. Distinguish between blue ocean strategy and red ocean strategy

To distinguish between blue and red oceans, businesses first need to understand the concept of red ocean strategy. Simply put, a red ocean is a large market, where there are many customers and many competitors. Meanwhile, a blue ocean is a small niche market, focusing on a target customer group and has few or no competitors.

In other words, a red ocean is like a big pie that is available to all companies and businesses in the same field. In contrast, a blue ocean is a pie that businesses create and enjoy themselves. Here are the obvious characteristics of the two strategies:

3. 6 steps to effectively apply blue ocean strategy for businesses

To overcome fierce competition and open up new opportunities, many businesses are turning to the Blue Ocean strategy . However, to apply this strategy effectively, businesses need to follow a methodical process. Below are 6 important steps to help businesses implement this strategy successfully.

3.1 Step 1: Identify potential markets

First, businesses need to analyze and explore new potential markets that can be accessed, including untapped or developing markets. To achieve this, businesses need to:

• Research and analyze the current market to identify industry issues and challenges. This helps businesses identify untapped markets with potential for growth.
• Explore new markets by looking at the latest trends, industry policies and regulations; customer needs and wants, and upcoming events.
• Assess the viability of entering new markets by considering available resources, staff skills and experience, and potential partners.

3.2 Step 2: Build a guiding strategy

Once potential markets are identified, businesses need to orient their strategies with specific business goals and detailed plans to achieve them.

• Clearly define specific business goals and measure results to ensure progress is always on track.
• Identify the key elements needed to achieve goals and develop detailed plans for implementation.
• Identify potential risks and challenges and develop measures to minimize their impact.
• Set up business performance metrics and monitor them closely over time to ensure the strategy achieves its goals.

3.3 Step 3: Understand customers

To successfully implement the Blue Ocean strategy , businesses need to understand the needs of customers, identify the problems and challenges they are facing, and then provide optimal solutions to meet those needs. To do this well, businesses need to:

• Market research and analysis to understand customer needs, desires, habits, behaviors and preferences.
• Identify and propose solutions to problems that customers are facing.
• Develop new products or services to satisfy customer needs.

3.4 Step 4: Research new products/services

Based on customer needs, businesses will design and develop appropriate new products or services. These products or services should focus on solving existing problems in the selected market. Specifically:

• Develop new product or service ideas by monitoring market trends and customer needs.
• Test new products or services to ensure they meet customer expectations and solve problems.
• Improve and refine new products or services based on customer feedback and business performance metrics

3.5 Step 5: Actual implementation

Once the product or service has been developed, the business needs to implement the strategy by focusing on branding, reaching customers, and promoting the product to the market. In this step, the business needs to carry out the following activities:

• Identify resources and develop an implementation plan to ensure the effectiveness of your blue ocean campaign.
• Outline a detailed implementation plan with specific steps and metrics to measure results.
• Provide adequate resources, support and training to staff to execute the strategy.
• Monitor and manage strategy implementation progress to ensure goals and outcomes are achieved.

3.6 Step 6: Evaluate and improve

Finally, to evaluate and improve the effectiveness of the Blue Ocean strategy and meet customer needs, businesses need to take the following steps:

• Measure and compare results against set targets to evaluate the effectiveness of the strategy.
• Collect and analyze customer feedback to better understand what improvements need to be made to your product or service.
• Evaluate and analyze strategy implementation activities to identify strengths and weaknesses and make necessary adjustments.
• Update and adjust Blue Ocean strategy regularly to meet market changes and customer needs.
• Plan improvement activities and redeploy strategies to achieve optimal results.

In short, to succeed with the Blue Ocean strategy , businesses need to conduct a series of activities from identifying potential new markets, strategic orientation, focusing on customers, designing new products or services, implementing strategies and evaluating and improving strategies. This is a process that requires high investment and concentration from businesses, but also brings many opportunities and great benefits for the sustainable development of businesses in the global market.

4. Principles when building a blue ocean strategy

The process of building and implementing a Blue Ocean strategy will face many challenges and risks. To build a successful strategy, businesses need to adhere to the following principles:

• Redefine market boundaries by focusing on substitute products, strategic groups within the industry, and the needs of individual customer groups to create consumer appeal.
• Expand and reach beyond current market needs to find breakthrough products.
• Building a new business model follows a logical sequence, including four steps: assessing product value, determining selling price, calculating costs, and seeking customer approval.
• Overcome the cognitive limitations of organizational divisions and interest group issues.
• Manage your business effectively with a Blue Ocean strategy , creating a positive psychological impact, motivating consumers and promoting proactive innovation.

5. Case Study of successful application of blue ocean strategy

Blue Ocean Strategy has been chosen and successfully implemented by many “big guys”. Here are some examples:

5.1 Viettel's Blue Ocean Strategy

Viettel - a military telecommunications enterprise, has applied the Blue Ocean strategy by focusing on developing information technology and communications services. This is done through the use of advanced technology products to meet customer needs as well as minimize environmental impacts. Viettel's typical projects include using solar energy to supply electricity to base stations and deploying the Smart City model.

5.2 Apple's Blue Ocean Strategy

Apple developed a multimedia platform that includes photos, videos, and music called iTunes. The idea was born out of the problem of illegal music file sharing that was rampant in the market. In 2003, Apple introduced iTunes with the aim of providing individual song lists and applying a reasonable pricing strategy. This application made it easy for users to buy songs individually instead of having to buy entire CD albums.

Soon after, Apple, along with record companies, protected intellectual property without compromising the user experience. Today, iTunes accounts for about 60% of the global digital music download market.

5.3 Canon's Blue Ocean Strategy

While competitors focused on traditional photocopiers for managers who purchase large office equipment, Canon targeted a different customer segment, the secretarial department. The company focused on producing compact, fully functional photocopiers to meet the needs of this customer group. Canon succeeded in unlocking new value and creating a new market space that was not heavily contested.

6. Future vision of Blue Ocean strategy

With the Blue Ocean strategy , companies can explore new opportunities, enhance their competitiveness and build a strong position in the market. However, this strategy also has certain challenges. Let's find out now!

6.1 Development opportunities of blue ocean strategy

By effectively utilizing the benefits that the Blue Ocean strategy brings, businesses can create a pioneering position, leave an impression in the hearts of customers as well as maintain business advantages in the future:

• Creating new value for customers by developing unique and differentiated products or services from competitors in the market is a way for businesses to increase satisfaction and also make a big difference in the industry.
• Creating new market space not only helps businesses gain competitive advantage but also expands their customer base. This helps increase the business's sales and profits, while reducing competition with existing competitors in the market.
• Increasing the long-term sustainability of a business in the market by offering unique and differentiated products or services is an important goal in every company's development strategy.

6.2 Challenges facing businesses

Although highly effective and bringing great advantages, the Blue Ocean strategy also has certain challenges. Specifically

• The high initial investment cost is a significant challenge in implementing this strategy. Blue ocean requires businesses to have creative vision and good market analysis ability to invest in research and development of new products and services.
• Implementing this strategy is complex and requires close coordination between departments within the business. Staff need to have high professional knowledge, while the management needs to care and strongly support to achieve long-term goals.
• Fierce competition with rivals in the market is inevitable, especially when other businesses may discover new or improved approaches. This can lead to the destruction of the market space that the business has tried to build.

7. Effectively deploy Blue Ocean strategy with support from 1C:ERP solution

To support the successful application of the Blue Ocean strategy , businesses can refer to the comprehensive business management solution 1C:ERP of 1C Vietnam. Designed for businesses in many different industries, the 1C:ERP system is easily integrated into current operating models and brings many benefits to businesses in the process of building and implementing business strategies such as Blue Ocean.

Some of the advantages of 1C:ERP include:

• The system with open logic helps businesses master technology, limiting dependence on suppliers.
• Allows quick customization, easy integration with other solutions in the 1C Vietnam ecosystem as well as third parties.
• Ready with Vietnamese Accounting Standards (VAS) and International Accounting Standards (IFRS), supporting the reporting process.
• Compatible across multiple platforms, leveraging existing business data.
• Provide full functionality to apply to many business models, especially suitable for manufacturing businesses.

Developed based on modern low-code technology, 1C:ERP solution provides many useful subsystems, from inventory management, sales, project management to production management, database... In this way, businesses can optimally exploit data sources from different departments, thereby finding potential market niches and effectively implementing Blue Ocean strategies .

In the context of an ever-changing economy, applying the Blue Ocean strategy is a smart and wise move to ensure sustainable development and outstanding success. Start building your business strategy today so you don't miss the opportunity to become a pioneer in your field. Contact 1C Vietnam now for advice on comprehensive 1C:ERP business management solutions, supporting the process of building and implementing plans.