The current business spectrum is exposed to a series of challenges starting from competition pressures to unexpected financial market fluctuations. In addition, currently industries are filled with a large number of potential competitors, and there is no scope for new market entrants. This paper will critically evaluate a marketing concept called ‘Blue Ocean Strategy’ introduced by W. Chan Kim and Renee Mauborgne and discuss its relevance to today’s business challenges. The paper will also consider some real life examples to evaluate the potentiality of this concept.
Blue ocean strategy was proposed by W. Chan Kim and Renee Mauborgne, co-directors of the INSEAD Blue Ocean Strategy Institute. In order to understand the concept of blue oceans, it is necessary to explain the idea of red oceans. Red oceans refer to the currently known market space where the rules of the competition have been well defined. In red oceans, companies compete with each other in every possible way so as to gain a competitive advantage over others, and this cutthroat competition turns the ocean bloody (or red) (Kim & Mauborgne, 2004). In contrast, blue oceans indicate a fictitious or unknown market space where no industry exists actually and hence is not exposed to competition pressures (Ibid). While operating in a blue ocean, firms do not need to fight competitors to grab their share of the market because demand is created newly. The threat of competitive rivalry is irrelevant in blue oceans because the rule of competition is yet to be defined, and therefore this market space has the potential for rapid and profitable growth (Weihrich, Koontz & Cannice, 2013, p.144). In a simple sense, blue oceans are the market segments that are still to be explored.
“The blue ocean strategy is a strategy to survive by creating new markets and making competition irrelevant” (cited in Rolstadas, Hetland, Jergeas, and Vestney, 2014, p.34). The proposers of the blue ocean strategy, Kim and Mauborgne, state that this concept combines “analytics with the human dimension of organizations” (p.xv). The concept of ‘value innovation’ is the core element of blue ocean strategy (Wuwei, 2011, p.52). Value innovation is the process creating value for the company and its stakeholder by promoting differentiation and low cost simultaneously and thereby exploring untapped market space. It is important to note that the ultimate objective of value innovation is not to gain a competitive edge over the market rivals but to make the competition irrelevant by being the setter of game rules. Under the blue ocean strategy, firms constantly focus on minimizing or eliminating services/features that are less recognized or appreciated in the market environment.
History of the concept
While analyzing the history of the blue ocean strategy, it seems that this concept was developed as a result of 20 years of research by W. Chan Kim and Renee Mauborgne (Singh , 2014). The theorists researched over 150 strategic moves made in more than 30 industries during the period 1880-2000 (Ibid). The blue ocean strategy and the related analytical frameworks were first published in the international bestselling book titled ‘Blue Ocean Strategy’. The blue ocean strategy was popularized and discussed globally following the publication of this book in 2005. Scholar say that competition advanced to its extreme level with the turn of the 21st century and the increasingly growing competition in the modern marketplace made it difficult for many firms to survive. In an effort to respond to this market scenario, academics thought seriously about a new business strategy that is capable of addressing the challenges of market competition and which in turn ended up in the formation of blue ocean strategy. The fast and widespread popularity of this concept subsequently led to the development of the Blue Ocean Strategy Network (BOSN), which is an international community comprising of ‘academics, executives, consultants, and government officers’ who support the blue ocean strategy (Blue ocean strategy, n.d.).
Relevance of the concept to today’s business challenges
I strongly believe that the blue ocean strategy is extremely relevant for addressing today’s business challenges. It is obvious that most of the current business challenges are stemming from intense competition occurring in the modern marketplace. Today the vast majority of the companies are in the red ocean as they fight each other for a piece of finite sales in an effort to increase their market share (Kapferer, 2012, p.207). A company in the red ocean becomes more vulnerable to competition pressures and profit declines as more competitors enter the market. Hence, companies can manage the current business challenges to a great extent if they exit the red ocean that is characterized with cutthroat market competition. In the current context of intensifying market competition, it would be better for businesses to enter the blue oceans where competition is irrelevant and the market is completely uncontested (Sheth, 2011, pp.168-169). Once the company enters the blue ocean, it will no longer be exposed to competition challenges that greatly limit the efficiency and effectiveness of modern businesses. For instance, Cirque de Soleil implemented the blue ocean strategy successfully by blending theater, opera, and ballet and thereby creating market space for this new concept. The firm marketed itself with the tagline ‘we reinvent the circus’ (Kim & Mauborgne, 2005, p.na). As it is a blended form of art, it was capable of attracting the audience who was interested in theater, opera, and ballet.
In the perspective of a business firm, an industry is unattractive if it is characterized with increased competition. When a new company enters an unattractive industry, it simply tries to become a part of the market, sharing the current profits with other firms already operating in the industry. In this circumstance, the future scope of the business is very limited. Yellow Tail, an Australian wine brand, succeeded in implementing the blue ocean strategy when it planned to market its wine to everyone as a common drink (Kabukin, 2014).Prior to this shift in focus, the company had marketed its wine to wine drinkers only and hence the firm was forced to compete with complex French and Italian wines (Ibid). If a company proves itself to be successful in the blue ocean, other marketers will probably enter the industry and subsequently the degree of competitive rivalry will be increased. At this juncture, the blue ocean may turn red. Under such a market scenario, firms must be watchful for differentiating themselves in the market and maintaining their brand recognition. The company pursuing the blue ocean strategy is advised to develop loyal customer base in order to prevent the subsequent market entry of new competitors. Real life evidences suggest that blue ocean strategy works really as it enables followers to remain in the market without being exposed to competition threats. To illustrate, businesses such as China Mobile, Home Depot, Southwest Airlines, Starwood, Tata Motors have employed the blue ocean strategy to access the unexplored market segments.
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