Saturday, October 4, 2008

The Blue Ocean Strategy :The New Business Mantra For Business Survival

Renee A. Mauborgne, W. Chan Kim pioneered the concepts of The Blue Ocean Strategy is firms innovative thinking specially identify product or services some what different that it is doing at present and creating new rules for value additions through an innovative business re modeling.

The Blue Ocean is a new market place an absolutely new space for firms to cater to the un served customers.

The Red Ocean is a highly competitive market with lot many players operating in that market place and firms margins are under pressure

All new innovative technology are Blue Ocean , say Youtube of Google Inc, Iphone , iPod of Apple Computers Inc to name a few is absolutely Blue Ocean a new market place a virgin global market territory .

Firms has to have a practical market and customer analysis and in-depth understanding of the market dynamics and system in business process thinking must introspect the present conditions the new opportunities lying ahead

Of course it is an enhancement strategy piggy bagging on strategic drifts, SWOT analysis, Michael Porter's generic competitive strategies, Porter's five forces, Porters Differentiation Strategy, BCG Matrix,and other systems adopted in strategic planning and process of change management.

If we track back to Late Dr Michael Hammer’s basic 3C’s( Customer, Competition, Change) while analyzing Business Process Re engineering for a firm, Blue Ocean is indebted to the 3C’s and BPR.

Now in the world of globalization, competition is the name of the game, and to win the game firms must innovate or perish.

It is not only to innovate the product and services but also to innovate a new market segments the product and services can be catered.

An Example: Global Automakers are looking a segment of sub US$3000 car market using alternative source of energy, existing auto makers are getting in to Blue Ocean with sub US$3000 cars focusing for the emerging markets in Asia, Africa and Latin America. Of course not shifting focus from existing market place like EU and North America which are slowly becoming red ocean both product wise and market segment wise.

Yes ,Blue Ocean can become Red Ocean ,back to the basics of Free Market Economics( Free Entry and Free Exit , no firm can operate in a super normal profits or abnormal profits but only can operate in normal profits in long run), new entrant can replicate the firms practicing Blue Ocean and can make the Blue Ocean a Red Ocean.

Markets over which the competition is fierce have turned red. In the bloody red ocean, even the organizations which manage to stay afloat, and command a sizable market share might often face the mind baffling problem of diminishing profit margins for every increase in the pie of the business market share. Markets( bundle of un served customers) still not explored or non existent markets to be precise, are blue (they are yet to turn bloody where firm can operate in super normal profits) and firm’s management smartness should in fact go about identifying and creating such new markets.

Blue oceans are created when there is a perceptible change, an improvement, in value addition. There needs to be value innovation.

When Blue Ocean strategy happens, it makes competition irrelevant as it has created an uncontested market space

Please Click to read the article in HBR.

The major concept made in the Blue Ocean Strategy is that firms compete in red oceans( crowded market, large number of competitors a typically monopolistic market tending towards hyper competition ) which are markets that are blood red due to wars( price, market share, human capital shortage, etc) amongst the existing players.

The Blue Ocean Strategy is all about encouraging leaders to develop pristine blue markets, which have not yet been tapped.

Strategy Canvas: Strategy Canvas which is the very core and primary tool used to define a new high level business plan and approach. Strategy Canvas meticulously identify the factors that are the building blocks of the overall strategy of each company competing in that industry. This provides a clear visual representation and enables one to construct a strategy which breaks away from the pack by addressing a different market using a different business model.

Mauborgne, and Kim have taken a many real life examples such success as South West Airlines, CNN, McDonald's, primarily is the service industry.Sustaining and consistency both are important in Blue Ocean strategy.

1 comment:

Anonymous said...

Recently an insurance company nearly wind up....

A bank is nearly bankrupt......

How it affect you? Did you buy insurance? Did you buy mini note or bonds?

They bailout trouble finance company, but they will not bail out your credit card bills……You got no choice, and no point pointing finger but you can prevent similar things from happen again……

Who fault?

The top management of the Public listed company ( belong to "public" ) salary should be tied a portion of it to the shares price ( IPO or ave 5 years ).... so when the shares price drop, it don't just penalise the investors, but those who don't take care of the company.....If this rule is pass on, without any need of further regulation, all industries ( as long as it is public listed ) will be self regulated......because the top management will be concern about their own pay check……

Are you a partisan?

Sign a petition to your favourite president candidate, congress member, House of representative again and ask for their views to comment on this, and what regulations they are going to raise for implementation.....If you agree on my point, please share with many people as possible....