Approaches to developing business strategy

Approaches to developing business strategy involve methods that senior managers employ to pinpoint, formulate, and select from various strategic choices.

The concept of blue ocean strategy

Blue ocean strategy emphasises shifting away from intense rivalry towards innovation and market creation. It was developed by management experts W. Chan Kim and Renée Mauborgne.

Core elements of blue ocean strategy

• Uncontested market spaces - Known as blue oceans, these are fresh markets without direct rivals.
• Contested market spaces - Referred to as red oceans, these are saturated areas where businesses fiercely compete for existing customers.
• Strategic goals - The approach aims to transform competition rules by combining strong product uniqueness with cost efficiency.
• Benefits of implementation - In blue oceans, firms avoid head-to-head battles, focusing instead on generating new demand.

The four actions framework

The four actions framework is a tool within blue ocean strategy that guides firms in uncovering new market opportunities. It prompts managers to challenge industry norms by asking targeted questions about existing practices.

Questions in the four actions framework

• Raise - Which elements could be elevated beyond the typical industry level?
• Reduce - Which elements, driven by rivalry, could be scaled back?
• Eliminate - Which long-accepted competitive elements could be completely removed?
• Create - Which novel elements, never before provided in the industry, could be introduced?

Differences between red and blue ocean strategies

Red ocean strategies centre on thriving within established markets through direct competition, while blue ocean strategies focus on inventing new spaces to avoid rivalry.