Henry Ford brilliantly used the Blue Ocean Strategy. He clearly saw that the automobile market was narrow, as the target audience consisted of rich citizens only. Over 500 companies were producing highly customized and costly product. The competition was furious and the target audience – very limited. The whole industry was not designed for the mass market. Therefore, when Ford realized his new idea of producing inexpensive and durable cars, he really made a breakthrough in the industry. By reengineering the production processes, he managed to manufacture affordable standardized cars thus creating a new market. In such a way he found his “blue ocean”, while the others continued to fight in the “red ocean” for the narrow luxury market.
In order to implement the strategy of earning the mass market Ford needed to find the way how the production costs could be lowered. In order to decrease costs Ford pursued simplicity and durability. Every step of the manufacturing process has to be analyzed. Consequently he focused on one model only (in one color), standardized the processes, introduced a new assembly line and finally got rid of the complicated and time consuming operations, thus saving money on labor costs and speeding up the production process. The new approach ensured that cars were reliable and easy to fix. Moreover, such modernization resulted in the economy of scale that allowed to cut the price of the product to such a level that a former alternative to the old luxuries car, a horse –driven carriage, happened to be even more expensive than the Ford’s vehicle. Finally, in less than twenty years the Ford’s ambitious idea has changed the whole industry setting aside all the hundreds of manufacturers of both luxury hand made cars and cheaper horse driven carriages. Ford has found his “blue ocean” and his market share raised drastically.
“8 Key Points OF Blue Ocean Strategy”. blueoceanstrategy.com. n.d. Web. Accessed 4
Kim, W., & Mauborgne, Renee. “Blue Ocean Strategy”. n.d. PDF file.