Friday , 22 August 2014
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Blue Ocean Strategy

Globalization, it must be said, has actually resulted in globalization of competition. There is hardly any territory that could be regarded as uncharted. The sight of professionals from developing counties foraying into domains unreserved for them till the turn of the century and that of M.N.Cs ‘violating’ the set norms of fiercely protected ‘virgin’ domestic economies of the East and the South Block suggest one and the same.

Competition is the name of the game.
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 sizeable market share often face the mind baffling problem of diminishing profit margins for every increase in the pie of the business market cake. This book does not cater to these red oceans. Markets still not explored or non existent markets to be precise, are blue (they are yet to turn bloody) and corporations should in fact go about creating such markets, authors opine. These markets are not the ones that are created when technology makes a quantum jump (technology innovation). Creating a bleeding edge technology is not on what the focus is. Blue oceans are created when there is a perceptible change, an
improvement, in value addition. There needs to be value innovation. And when it happens, it makes competition irrelevant as it has created an uncontested market space.

To draw an analogy, Sony created a new market of gigantic proportions with absolutely no technology innovation, with its portable music system, The Walkman. It had, by the stroke of imagination, created an Ocean, in the realm of markets, the color of which was blue.
The book attempts a systematic study of blue oceans. How they can be created? How to make the ocean blue for an extended period? How to make the blue ocean bigger? How not to mistake an apparently bluish ocean for one? The wisdom offered is, as the authors state, “based on a study of 150 strategic moves spanning more than a hundred years

and thirty industries”.

The book outlines six principles to make formulation and execution of Blue Ocean Strategy systematic and actionable.
The following principles make the very conception of Blue Ocean, virtually considered as a product of intuition, more amenable to mundane academic thought processes.

I) Formulation principles
1) Reconstruct Market boundaries.
2) Focus on the big picture, not the number.

3) Reach beyond existing demand.
4) Get the strategic sequence right.

II) Execution principles
5) Overcome key organizational hurdles.

6) Build execution into strategy.

A host of parameters like Industry in question, the size of the market, purchasing power of the chief economic agents, and the state of economy need to be factored in before a blue print for action along these aforesaid principles could be prepared.

The Four Actions Framework

In order that a blue ocean is created, as has been outlined before there needs to be value innovation within the stipulated budgetary constraints. This value addition can be achieved by means of a shift in the focus on certain factors. The questions which the top brass of the organization should ask to itself are,
1) Which of the factors that the industry takes for granted should be eliminated?
2) Which factors should be reduced well below the industry’s standard?
3) Which factors should be raised well above the industry’s standard?
4) Which factors should be created that the industry has never offered?

The first two factors help in bringing down the cost of the product and enable the company to have cost advantage when compared to its competitors. The last two factors help in lifting buyer value and in creating new demand. In short value can be created with appreciably no increase in the cost of the product. Take for example, the introduction of the Maruti 800 in the Indian car market in 1983.

Comfort was one thing that the automobile Mogul, Suzuki decided to abandon. The safety factor too was compromised. This was brought down well below the Industry standard. This brought down the cost of the vehicle. The premium was placed on mileage. The kind of mileage offered was well above the standard set by the automobile industry. Well distributed service stations distributed along the length and breadth of the
country was another feature which has never been offered at all. These two factors lifted the buyer value and created
the buyer demand. Thus was born a car which was offered at a price of Rs 40,000 and assured a mileage of 21 kilo meters. The competitors of Suzuki, were offering cars at prices well above One Lakh assuring a mileage well below than what Maruti 800 offered. The birth of Maruti 800 had created a blue ocean.

The book deals in detail the finer details of blue ocean strategy. The host of examples presented reflects the thought patterns of the top brass of the companies who were responsible in realizing blue oceans in their own respective arena. The book costs $42 and has been published by the Harvard Business School Press. It is a must read for anybody vying for a market share in the red oceans.

Name of the book: Blue Ocean Strategy
Authors: W.Chan Kim, Renee Mauborgne.
Subject Area:
Rating: International Best Seller


- Ajay S.Kumar

ajaymec@yahoo.co.uk

       
  • http://www.strategizeblue.com Blue Ocean Strategy expert

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  • ICFAI Distance Education

    I’ve read Blue Ocean Strategy and I would certainly recommend it to everyone!

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