| A Unique Business Strategy, Blue Ocean Strategy |
| Invention Development Advice - Marketing | |||
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Over a cup of coffee, a friend told me about a unique business strategy. The strategy he spoke about is what is known as the Blue Ocean Strategy. I research the subject matter further and found out that The Blue Ocean Strategy is a corporate strategy that aims to tap unclaimed markets making competition irrelevant. Professors W. Chan Kim and Renee Mauborgne discusses the strategy extensively in their book "Blue Ocean Strategy," published by Harvard Business School Press.
Over a cup of coffee, a friend told me about a unique business strategy. The strategy he spoke about is what is known as the Blue Ocean Strategy. I research the subject matter further and found out that The Blue Ocean Strategy is a corporate strategy that aims to tap unclaimed markets making competition irrelevant. Professors W. Chan Kim and Renee Mauborgne discusses the strategy extensively in their book "Blue Ocean Strategy," published by Harvard Business School Press. According to the book, "Blue Ocean" refers to an untapped market, wherein there is only little or no competition at all enabling anyone to claim the market for his own. On the other hand "Red Ocean" refers to a market where competition is very high. In this situation, the market is considered as very crowded already since almost everybody is producing the same type of service and the same kind of goods. To put it simply, Blue Ocean Strategy means to innovate something; something that makes people gives a higher value for a certain product or service. The additional cost for this innovation is reduced by eliminating product or service features that the market does not really care about. To further drive home the point, it is necessary that a Philippine based or a "local" example be given. An example on how the Blue Ocean Strategy was used here in the Philippines can be seen by studying the strategic moves of the Gokongwei group of companies who owns Mobile phone company, Sun Cellular and airline Cebu Pacific among other companies. The market for mobile phones has already been saturated by both Smart and Globe.Sun Cellular being a new player, did not have much market to start with. In order to survive as a company, what they did was to create a "new market" by adding value to products already found in existing markets. They did this by making calls within their network free. As a result a "new market" has opened. Since majority of the Filipinos are cost conscious, most of them now have two cellular phones or two sim cards in a dual sim phone. One for the other networks and the other one for Sun Cellular. The Gokongwei owned Cebu Pacific applied the Blue Ocean Strategy by adding "value" to what people really want, which is to "fly." In order to do this, airline fares must go down since this is what people care about. So Cebu Pacific slashed down their fares to give value to what people really want. In order to make up for this loss, they eliminated other costs such as newspapers a hot meal or a snack. This move, caused people to buy into this "new market." In order to survive, traditional Business strategy would normally want to "crush the competition." However Blue Ocean Strategy dictates that we "Create new markets with little or no competition." "Strategic thinking" is resorted to instead of the traditional business approach of "Strategic Planning." In Blue Ocean strategy we do not talk of "cutting prices" to capture a market, Instead we refer to it as adding "value" to products and services to claim an untapped market. According to the critiques, the Blue Ocean Strategy has already existed a long time ago. They further contend that the ideas that are said to be unique to the Blue Ocean Strategy are already used in traditional business strategies. However this line of thinking is not justified. A new theory is always built upon something that has already been accepted for a long time as a scientific principle or even theory. (As similarly as the theory of relativity rest upon the foundations of the principles of electricity, gravity, thermodynamics etc.) Our way of discovering something is built upon the knowledge that has been universally accepted by the majority. No matter what the critics say, it is certain that Blue Ocean Strategy is here to stay. In the years to come, it will surely have an effect on the way future entrepreneurs, managers and leaders will think and do business. More information: Click here to visit the blog of Zigfred Diaz to know more about blue ocean strategy
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