Question

Explain in depth what a Blue Ocean Strategy is and how to create the value curve?

Answer 1

The blue ocean strategy is a business theory that helps companies in searching for ways to gain "uncontested market space" than competing with similar companies. The strategy represents the simultaneous pursuit of high product differentiation and low cost, thereby making competition irrelevant. The blue ocean strategy is particularly needed when supply exceeds demand in a market. In an increasingly competitive environment, management face the challenge of finding ways to differentiate their products and services. Moreover, as markets develop over time, they split into multiple segments and it can be difficult to determine which factors are of most importance to customers.

The concept of a Value Curve is to use a diagram to compare products on a range of factors by rating them on a scale from low to high. These can be features, benefits or ways in which a product is distributed or consumed. The combination of these various factors defines the product or service. Multiple Value Curves can be drawn, for visual comparison with competitive products and to discover possible gaps in the market. By investigating the feasibility of these gaps it will be possible to identify changes to the product that significantly vary the value proposition. There are four ways to vary a product based on Value Curve analysis. These are:

1. Raise: Can any existing elements be enhanced or increased? What factors should be raised?
2. Reduce: What factors were a result of competing against other industries and can be reduced?  
3. Create: Is there anything that can be introduced which is not available within the market. A new feature that makes the product more effective in solving the customer’s problem.
4. Eliminate: Are there any elements that add no value to customers but are simply there as part of a status. Is there any factors that the industry has long competed on should be eliminated?