New Markets Instead of Price Wars: What Blue Ocean Offers Small Firms

Why price wars wear down small businesses

In many industries, offers look almost identical. Three trade businesses, three agencies, three suppliers offer the same thing at similar quality, and the customer decides on price. For a small business, this is an unfavorable position. It rarely has the size to win on cost, and every discount comes straight out of the margin.

A concept that has appeared in strategy books and seminars for two decades promises a way out of this position: Blue Ocean Strategy. This essay asks what Blue Ocean thinking actually achieves for small businesses and where it is overrated. To answer that, I first explain the terms and the central tool, then examine what research knows about the concept, and finally weigh two readings against each other.

If you sell only on price, you have given the customer no other reason.

Red and blue oceans: the terms

W. Chan Kim and Renée Mauborgne, professors at the INSEAD business school, presented the concept in 2004 in a Harvard Business Review article and in 2005 in a book. Their image is memorable. A red ocean is an existing market in which many suppliers fight for the same customers until the water is bloody. A blue ocean is a market space that nobody has occupied yet, where competition therefore plays no role.

Kim and Mauborgne call the way there value innovation: an offering that provides more value for the customer and at the same time costs less. In doing so, they contradict a widespread doctrine, formulated above all by Michael Porter, according to which a company must choose between cost leadership and differentiation. Blue Ocean Strategy claims that both can be combined if you reorder the rules of the industry instead of following them better.

The second tool is the strategy canvas. It plots the factors on which an industry competes, such as price, advice, delivery time, or features, and rates each supplier on them. The connected points form a value curve. If all suppliers’ curves look the same, it is a red ocean.

The mental model: the four actions

The most useful part of the concept is a simple set of questions that Kim and Mauborgne call the four actions framework. It goes through every factor of the industry and asks what should happen to it.

1. Eliminate

   Which factors that the industry takes for granted does the customer not need at all?

2. Reduce

   Which factors can be reduced well below the industry standard without the customer missing anything?

3. Raise

   Which factors should be raised well above the industry standard because they really matter to the customer?

4. Create

   Which factors does the industry not offer at all yet, although customers would benefit from them?

The first two questions lower costs; the last two increase value. That is the core of value innovation. An example with freely chosen assumptions shows what this can look like for a business that cleans offices for commercial customers.

The table does not describe a blue ocean in the grand sense. The business stays in its market. But its value curve now differs noticeably from that of its competitors, and the conversation with the customer is about reliability instead of price per square meter.

What research knows about the concept

Blue Ocean Strategy is one of the most successful management books of recent decades. Madsen and Slåtten (2019) examined its emergence and spread using management fashion theory. This theory asks why certain concepts become popular, looking at the suppliers of ideas, meaning authors, consultants, and publishers, as well as demand within companies.

The authors reach three findings. First, the concept fulfills the typical features of a management fashion: a catchy name, an interpretation that leaves many readers room, big promises of success, and the claim to apply to all companies. Second, Kim and Mauborgne base their claims of success mainly on case studies and examples. Critics object that the selection of these cases may be biased, because successful companies are sought out in hindsight and interpreted through one’s own lens. Third, the concept is considerably more present in discussion than in practice: most surveys show lower actual use than the attention would suggest. Several authors also ask whether Blue Ocean Strategy is really new or repackages older ideas from Ansoff, Porter, Levitt, and Hamel and Prahalad.

There are also studies that find a positive relationship. Eromafuru (2025) surveyed 460 owner-managers of small and mid-sized businesses in Nigeria. Use of Blue Ocean elements was associated with higher competitiveness, and a good part of this relationship ran through the businesses’ core competencies. In other words, if you design a new value curve, you benefit when you are particularly good at something that supports the curve. The study is based on self-reports in a single country and shows an association, not proof of cause.

Two readings: liberation or repackaging?

Both readings deserve to be taken seriously. The criticism mainly hits the concept’s claim: that competition can be made permanently “irrelevant” is a risky assumption for a small business. An offering that stands out in one region can be copied by a competitor within a few months. The defense, on the other hand, hits the value of the method: the four actions are a rigorous exercise in examining your own habits, and they cost only an afternoon.

I therefore consider a modest reading the right one. Blue Ocean thinking works for small businesses as a tool for differentiation, not as a strategy for a market without competition. Those who use it this way usually do not get a blue ocean, but a recognizably distinct value curve in an existing market. That is less than the book promises, but often enough to stop being compared on price alone.

Where the thinking holds up for small firms and where it does not

The strategy canvas shows how much room a business has for its own value curve. A worked example with freely chosen ratings from 1 (weak) to 10 (strong) for the cleaning business from the table, compared with the average of competitors in the region:

The curve shows what matters: the business is not cheaper but somewhat more expensive, and justifies this with two factors where it is clearly ahead. This holds as long as the factors really matter to the customer and the business is better at them than others. Here the circle closes with Eromafuru’s (2025) finding: the value curve needs a competence to support it. How to find out what a business should be known for is described in the guide sharpening your positioning. How to estimate competitors’ value curves from public sources is shown in the guide competitor analysis with little effort.

Related but not the same is specialization in a niche, discussed in specialization instead of a general store. A niche is a small part of an existing market; a blue ocean in Kim and Mauborgne’s sense is a newly created one. For small businesses, the transition is fluid. How little-known world market leaders grew big from narrow markets is described in Hidden Champions.

Conclusion: what Blue Ocean thinking is good for

To the guiding question: for small businesses, Blue Ocean thinking is useful as a method, not as a promise. The four actions and the strategy canvas help examine industry habits and design an offering that stands out recognizably. The concept is overrated where it promises a market without competition. The evidence for this is thin and rests mainly on selected success stories, and small businesses are quickly imitated.

1. List the five to eight factors on which your industry competes.
2. Rate your business and the competitor average on a scale from 1 to 10.
3. Go through the four actions and note one candidate per action.
4. Test the two most promising ideas in conversations with three customers before you change anything.

If you can then justify your prices differently, you have gained a lot, even without a blue ocean. How to translate such a justification into price conversations is described in the guide raising prices without losing customers. The way out of price wars rarely lies in a new sea; usually it lies in a clearer answer to the question of why a customer should buy from you in particular.