StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Blue Ocean Strategy - Essay Example

Cite this document
Summary
The paper " Blue Ocean Strategy" provides a viewpoint competition in a crowded market is not the way to sustain higher performance thus firms must seek opportunities to create blue oceans of the uncontested markets. Blue ocean strategy refers to the creation of new and uncontested markets spaces…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER97.6% of users find it useful
Blue Ocean Strategy
Read Text Preview

Extract of sample "Blue Ocean Strategy"

?Blue ocean strategy Blue ocean strategy Introduction According to Kim and Mauborgne, competition in a crowdedmarket is not the way to sustain higher performance thus firms must seek opportunities to create blue oceans of the uncontested markets. Blue ocean strategy refers to creation of new and uncontested markets spaces whereby competition is irrelevant due to new customer value (Kim and Mauborgene 3). On the other hand, red oceans represent industries that are currently in existence and where competition rules are well defined. Unlike red oceans, blue oceans create demand from the red oceans by breaking the boundaries of competition (Kim and Maubourgne, 2005). For instance, companies like music recording multinationals, management consulting and pharmaceuticals were hardly heard of in the last 100 years. In this case, companies will have the opportunity to re-create others in order to reflect the emerging realities in economic growth and blue oceans. The authors assert that technological advancements, increased deregulation of markets and improved industrial productivity will enhance creation of blue oceans. Saturation of the developed markets has resulted in to price wars and shrunk profit margins thus the need of a blue ocean strategy (Niciejewska and Dimitrov, 2009). Surprisingly, the authors point out that 86 percent of the surveyed companies seem to be comfortable in red oceans since they have only line extensions while only 14 percent are committed at creating new markets. It is interesting that the survey found out that 14 percent of the firms that invested in new market development delivered 38 percent of the revenues and impressive 61 percent of total profits. On the contrary, the 86 percent of firms concentrated on line extensions thus delivering 62 percent of the total revenues and only 39 percent of the total profits (Kim and Mauborgene 4). The article explains the imbalance towards red oceans as occasioned by a military strategy of the chief executives that is geared at competing with opponents in the concentrated market. On the other hand, blue oceans focus on entering markets without competitors. The authors make it clear that companies that rely on red oceans deny the ability to use the distinctive capabilities of the business in entering new markets. The authors provide an example of Japanese companies of 1980s due to decline of Western companies in droves. The authors agree that competition is important, but companies must attain competitive-advantage and develop markets with minimal or no competition (Warren, 2008). The authors go ahead to provide the logic behind the creation of blue oceans. The article outlines that new technology and innovation will create blue oceans. Some of the blue oceans that have been created by new technology include Ford Model IT and Apple Personal computers. Incumbents also create blue oceans within the existing business like AMC multiplex of 1995 and Palace theaters of 1914. The authors assert that strategic moves define blue oceans and no the size of the industry or companies. Accordingly, blue oceans build existing brands through creating brand equity just like Ford’s Model T that still benefits the company today (Kourdi, 2009). The article differentiates the red oceans from blue oceans since Red Ocean strategies compete in the current market space while blue oceans create new uncontested markets. Red oceans aim at beating competition while blue oceans desire to make completion irrelevant. In addition, blue oceans break the value to cost trade off unlike red oceans that make the value to cost trade-off (Koontz and Weihrich, 1990). The authors offer a deep explanation of blue ocean strategy by asserting that such companies reject the fundamental strategies of competition that aim at creating more value for customers or lowering operating costs. The authors offer an example of Cirque du Soleil since at the time of market entry Circuses were benchmarking without raising market revenues. Cirque did not follow the traditional logic of beating competition, but it redefined the problem and offered people the trill and sophistication of the theater. The demand for animal shows was declining due to animal rights concerns and boredom with stars as circus artists. Cirque kept clowns and shifted humor to and redesigned the tents. Cirque created sophisticated entertainments through multiple productions, themes and story lines thus entering in a new uncontested market (Harrison and John, 2010). The authors are critical that blue ocean strategy is attained when customer value, prices and costs of the whole organisation are aligned. Blue Ocean rejects that notion that firms compete in a pre-determined economic structure since it asserts that competition boundaries can be reconstructed to create new markets. In addition, such companies reap benefits for more than 10 years just like Federal Express and Southwest Airlines. Blue oceans create barriers of imitation since the companies create large economies of scale immediately and enjoy cost advantages just like Wal-Mart and eBay thus creating customer switching costs. Imitation is also made impossible by company politics and need to change the entire business model and train employees on the new culture. Not even the expensive marketing campaigns can unseat a blue ocean company in the market (McLoughlin and Aaker, 2010). The authors reject the misconception that blue ocean is about new products, new technologies and extension of product lines. The authors have clarified that Blue Ocean entails looking beyond the competition boundaries and making a strategic move that reconstructs the boundaries (DuBrin, 2009). The reconstruction of boundaries will create value for customers and present new demand through value innovation (Peng, 2009). Blue oceans can be created with or without new technologies just like the case of Starbucks. However, I believe that both red ocean strategies and blue ocean strategy are both needed in a business since red ocean strategies still provide revenues and profits for some organisations. The authors reject the misconception that Blue ocean strategy is customer oriented by asserting that it aims at creating new demand and capturing the mass market. The strategy is different from traditional market segmentation Blue ocean is not short term since companies must start by offering new offerings and pricing the products in order to capture the mass market. Conclusion Blue ocean strategy originates from the history of industrial evolution and strategic moves done by different companies. Blue ocean strategy aims at reconstruction of competition boundaries and creating new uncontested markets. Blue ocean strategy provides a systematic process of innovation in both new and existing firms. Unlike red ocean strategy, blue ocean strategy does not seek to beat competition, but to create uncontested markets thus making competition irrelevant. Red ocean strategy aligns the strategic decisions to low cost or differentiation in order to create value, but Blue ocean strategy simultaneously pursues both low cost and differentiation strategies thus driving customer value. From the above discussion, it is clear that Blue Ocean aims at reaching beyond the existing market and beating the organisational hurdles through reconstruction of market boundaries and value innovation. References: DuBrin, A.J. 2009. Essentials of management. Mason: Thomson Business & Economics. Harrison, J.S and John, C.H. 2010. Foundations in strategic management. Mason: Cengage Learning. Kim, W.C and Mauborgene, R. “Blue Ocean strategy”, Harvard Business review. October 2004. P 1-11. Kim, W.C and Maubourgne, R. 2005. Blue ocean strategy: how to create uncontested market space and make the competition irrelevant. Boston: Harvard Business School Press. Koontz, H and Weihrich, H. 1990. Essentials of management. New York: McGraw-Hill. Kourdi, J. 2009. Business strategy: a guide to taking business forward. London: Economists Association. McLoughlin, D and Aaker, D. 2010. Strategic market management: global perspectives. New Jersey: Wiley. Niciejewska, K and Dimitrov, D. 2009. Blue ocean strategy INSEAD School. Muchen: Verlag. Peng, M.W. 2009. Global strategy. Mason: Cengage Learning. Warren, K. 2008. Strategic management dynamics. New Jersey: Wiley & Sons. Weihrich, H., Koontz, H and Cannice, M.V. 2010. Management: a global and entrepreneurial perspective. New Delhi: McGraw-Hill. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Blue Ocean Strategy Essay Example | Topics and Well Written Essays - 1000 words”, n.d.)
Retrieved from https://studentshare.org/management/1469906-blue-ocean-strategy
(Blue Ocean Strategy Essay Example | Topics and Well Written Essays - 1000 Words)
https://studentshare.org/management/1469906-blue-ocean-strategy.
“Blue Ocean Strategy Essay Example | Topics and Well Written Essays - 1000 Words”, n.d. https://studentshare.org/management/1469906-blue-ocean-strategy.
  • Cited: 0 times

CHECK THESE SAMPLES OF Blue Ocean Strategy

Startbucks Blue Ocean Strategy

A canvas strategy: The Blue Ocean Strategy must include the canvas strategy which means that the central action and framework of the company must follow the Blue Ocean Strategy.... Blue Ocean Strategy means that tomorrows main leading companies will not fight with their competitors instead they will open up in places where the competition is absent and will make a mark for themselves or establish a proper brand for which the competition is irrelevant....
4 Pages (1000 words) Essay

Future Of Furniture Companies With Blue Ocean Strategy

The nucleus of the Blue Ocean Strategy lies in the creation of industries, which has no limitation with regard to its potentiality and profits.... … Blue Ocean Strategy means the creation of an industry, which has not yet existed.... Following blue ocean, strategies are not pipe dreams.... A very good example of furniture retailers who used blue ocean strategies to their benefits is the IKEA.... This helped IKEA to create a blue ocean for them and they became the single retailer of low priced high selection furniture....
3 Pages (750 words) Essay

Managing Strategic Design

says W Chan Kim (2005), the author of the bestseller - Blue Ocean Strategy.... The book - Blue Ocean Strategy, describes the marketplace as two kinds of ocean - red, which are crowded and small, and blue, which are uncontested and unexplored.... The Blue Ocean Strategy is a market-creating strategy.... he cornerstone of Blue Ocean Strategy is value innovation.... The Blue Ocean Strategy creates value while making customers comfortable and make them pay for such comfort and convenience....
6 Pages (1500 words) Book Report/Review

Blue Ocean Strategy

In doing so, concept of strategic management have One of such theoretical concerns of contemporary strategic management can be identified as the Blue Ocean Strategy.... Blue Ocean Strategy and its history of evolution in the contemporary era will be taken into concern.... The notion of Blue Ocean Strategy is fundamentally defined as an effective managerial decision making framework that constitutes different business organisations with the intention of enhancing their profitability and accomplishing superior competitive position over its chief business market competitors....
6 Pages (1500 words) Essay

Blue Ocean Strategy - How to Create Uncontested Market Space and Make the Competition Irrelevant

Basically, the book Blue Ocean Strategy – How to create… Chan Kim and Renee Mauborgne deals with the former idea of novelty and improvisation to generate such growth and profits one never knew was possible.... The starting section outlines the most important parts of the Blue Ocean Strategy and the importance of forming a low costing evaluation.... The second part entails how the Blue Ocean Strategy was created.... The risk is always there of course but the Blue Ocean Strategy helps in forming the courage to take that risk, especially if there is enough confidence in the idea or the product....
4 Pages (1000 words) Essay

Benefits of Blue Ocean Strategy

The Blue Ocean Strategy is a book based on two types of business marketing strategies namely the Blue Ocean Strategy and the red ocean strategy (Kim & Mauborgne, 2013).... The idea behind the book is the advantages of the Blue Ocean Strategy over the red ocean strategy.... However, the book talks about a new and different approach that is the Blue Ocean Strategy.... The terms Blue Ocean Strategy is metaphorical to the authors' envisioning and perception of the strategy in physical terms....
4 Pages (1000 words) Essay

Blue ocean strategy is simply a repackaged version of Bowmans hybrid strategy

Bowman's hybrid theory outlines that organizations should focus on cost Blue Ocean Strategy and Bowman's Hybrid Strategy a)Analysis a)According to Wiley Blue ocean theory focuses on value innovation as one of its key elements to achieve new markets, which initially Bowman's hybrid theory termed the strategy as cost advantage.... The Company employed lower costs and differentiation which is the basis of Blue Ocean Strategy to create value innovation.... a)According to Wiley 2015 blue ocean theory focuses on value innovation as one of its key elements to achieve new markets, which initially Bowman's hybrid theory termed the strategy as cost advantage....
2 Pages (500 words) Essay

Porters Five Forces Model of Strategy

Porter focused on the power of competition in the market whereas Blue Ocean Strategy, developed by Kim and Mauborgne in 2005, makes the companies move towards growth and higher profits through innovation.... Porter's model focuses more on those powers, which can affect the business of a company whereas the Blue Ocean Strategy focuses on the concept of innovation and improvement.... Blue Ocean Strategy values innovation in all aspects of a business whereas Porter's model focuses more on analyzing the forces that have the ability to affect the business....
7 Pages (1750 words) Case Study
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us