Blue Ocean Strategy is the creation of an entirely new company which does not have competitors. It creates new business that does not compete with existing businesses. It is a contrast to Red Ocean Strategy where there is a battleground for competition, and companies strive to compete with already existing businesses. Blue ocean industries are built either as startups or from industries’ core businesses, and both new entrants and existing industries have opportunities to create blue oceans in a new market space. Blue oceans create their own new demand and capture the market. It is a strategic move that creates brands in that the new product created will be its own brand for a particular new market. The new market will attract customers because it will not have a competition. In blue oceans, both differentiation and low cost strategies are applied at the same time as opposed to red ocean strategy where customers can not enjoy the benefits of both low cost and high value at the same time. Blue oceans are able to achieve this by providing quality products and services. They determine what their inputs are and the costs of the inputs. Without compromising on their returns, they determine their market and the price as they provide value the market never had. As a result, their costs are reduced over time, and they enjoy economies of scale since they have the opportunity to focus the activities of the organization to achieve differentiation and low cost strategies. Red oceans operate in an existing market. They have competition and have to share the market with other members. They have to make a decision whether to use differentiation or low cost strategies as they cannot afford to apply both at the same time. Blue Oceans industries are more profitable than red ocean strategies because they are markets that were untapped with high created demand and an opportunity for high growth. However, corporate strategy is biased towards red oceans when expanding existing companies or creating new companies. This influence is due to conventional thinking of military models. When companies compete, the market gets crowded, thereby reducing market share that leads to a reduction in growth and profitability. Blue oceans have the advantage of being difficult to imitate by other players over a long period. Because blue oceans create new markets, they are able to attract many customers and begin to create economies of scale almost immediately. They will thus have a cost advantage that will be a barrier discouraging any possible new entrants thinking of imitating them. Because blue oceans create a brand, they command customer loyalty that creates demand and provides an opportunity for growth. Brand loyalty is also an effective barrier that will keep off those thinking of imitating the blue ocean. In conclusion, businesses operating under red ocean strategies are more in the market than those operating under blue ocean strategies. Intense competition among read ocean industries results in reduced profitability, growth and even value. Blue ocean strategies should be embraced more because they provide value, cost and profitability. Players operating under both strategies should understand their markets and ensure high performance in both cost and profitability.
Blue Ocean Strategy Essay Example
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