Navigating the Currents: Risks when Pursuing Blue Oceans pt.3
The pursuit of an effective Blue Ocean Strategy can be a daunting effort. Our visionary owner Alex is on a quest to create a successful Blue Ocean Strategy. After learning valuable lessons from both a SWOT and PEST analysis, Alex felt their team was more prepared than ever to navigate the unpredictable waters toward an uncharted market space.
Alex's agency had developed a revolutionary web service, leveraging their strengths and the opportunities they had identified in the market. They had managed to create a value proposition that was unique and unparalleled in their industry. Just as they were about to launch their new service, a rival agency announced a product strikingly similar to theirs, with a few additional features and a slightly lower price point. Alex was taken aback. They had been so focused on creating a new market space that they had failed to consider the competition's potential moves.
We should never underestimate our competition. While the Blue Ocean Strategy is designed to help businesses break away from the competition and create uncontested market space, understanding the competitive dynamics within existing markets remains vital. This understanding is precisely where Porter's Five Forces framework comes into play.
Keeping Your Eye on the Prize
Created by Michael E. Porter, this model analyzes an industry's competitive forces to determine the potential profitability of an industry.
The Five Forces include:
The bargaining power of suppliers.
The bargaining power of customers.
The threat of new entrants.
The threat of substitute products or services.
The intensity of competitive rivalry.
Here's how Porter's Five Forces can enhance a Blue Ocean Strategy:
Bargaining power of suppliers: By understanding how much power your suppliers have, you can gain insights into potential costs in your value chain. This knowledge can help you strategize which factors to raise, create, eliminate, or reduce.
Bargaining power of customers: Customers' bargaining power informs you about potential shifts in demand. This insight can help you anticipate how to raise and create value in your new market space.
Threat of new entrants: Knowing the potential for new competitors to enter your market can help you build barriers and plan for long-term sustainability in your Blue Ocean.
Threat of substitute products or services: Understanding the threat of substitutes can help you identify potential challenges and opportunities, informing your decisions about where to create a leap in value for your customers.
Intensity of competitive rivalry: Although the Blue Ocean Strategy is about making the competition irrelevant, knowing its intensity can help you better understand the current market space and see how to differentiate yourself within it.
By integrating Porter's Five Forces into your strategic planning, you can develop a more comprehensive, robust strategy that considers the potential of uncharted market spaces and the realities of the current industry landscape.
There Be Pirates On Them Seas
In the end, a successful Blue Ocean Strategy isn't just about moving away from the competition—it's about understanding all the forces at play in your industry and using that understanding to create a unique value proposition that can drive sustainable growth.
This understanding gave Alex a new perspective on the industry landscape - the bargaining power of suppliers, the bargaining power of customers, the threat of new entrants, the threat of substitute products or services, and the intensity of competitive rivalry.
Stay tuned for the next chapter in our series. Until then, keep exploring those uncharted waters and uncovering new opportunities for growth. And remember, even the most turbulent oceans can lead to undiscovered treasures.
Stay up-to-date with the latest articles on simplifying technology, driving innovation, and fostering social impact. Subscribe now and join our growing community of tech enthusiasts, professionals, and change-makers. Together, we can shape the future!
