TheBlue Ocean Strategy
Theblue ocean strategy
Thestiff competition in the overcrowded market segments or industriesthwarts organizational performance. Individual firms can address thischallenge by creating more blue oceans. Kim & Mauborgne (2004)stated “Blue oceans denote all the industries not in existencetoday” p. 2. In other words the term a blue ocean refers to themarket spaces that have either not discovered or have remainedunexploited. From the company’s perspective, the blue oceanrepresents a market space that promises a reduced cost of products aswell as the cost of sales. For example, the exploitation of a blueocean, Megaplexes, in the year 1995 enhanced the viewers’experience, while reducing the cost of providing the theatricalcontent to the theater owners (Kim & Mauborgne, 2004). Thisimplies that firms should focus their attention towards the marketsthat have not been exploited, instead of venturing in the overcrowdedand competitive industries.
Theterm red ocean, on the other hand, is used to describe the marketspaces or industries that are in existence today. In this type ofmarket space, the boundaries of each industry are clearly defined,and all players in each of these industries understand and accept therules of competition. According to Kim & Mauborgne (2004)companies operating in the red ocean compete for the businessopportunities that have already been discovered and exploited. Thismeans that companies in the red ocean strive to outperform each otherand increase their respective market shares, which can only berealized by reducing the market share of other players. In essence,the blue ocean limits companies to a few and traditional businessopportunities to the extent that the growth of individual companiesand profit prospects is constrained.
Keysuccess factors for the automotive industry, the computer industry,and movie theaters
Sellingat affordable prices
Playersin the three industries succeed by producing goods that their targetconsumers can afford and use them to satisfy their needs. Forexample, Ford Company, which operates in the automobile industrymanaged to create a blue ocean by producing a car model named ModelT,which was sold at an affordable price (Kim & Mauborgne, 2004).The IBM company, which operates in the computer industry, creates ablue ocean by reducing the prices of existing technology startingfrom the year 1952 (Kim & Mauborgne, 2004). Similarly, Palacetheaters created an operalike environment that allowed its customersto view films at a price they could afford.
Addressingthe specific needs of the target customers
Thecapacity of each company to provide services and goods that addressthe needs of customers leads to an increase in sales and the overallsuccess of the company. For example, the Chrysler Company managed todevelop a minivan that was easy for its consumers to use in 1984 (Kim& Mauborgne, 2004). In 1999, Apple Company managed to create ablue ocean by producing the all-in-one computers that were easy forits consumers to operate (Kim & Mauborgne, 2004). In 1960, AMCdeveloped a multiplex that gave its customers a wider selection base,thus satisfying their desires.
Pioneeringthe new technology
Thecompany’s capacity to develop a given technology increases itscapacity to create a blue ocean, thus increasing chances for itssuccess. For example, CRT Company developed the modularizationtechnology in 1914, which resulted in its success in the automobileindustry (Kim & Mauborgne, 2004). However, some companies,especially in the computer and theater industry are able to modifythe existing technology to come up with superior products, thuscreating a blue ocean. For example, Compaq used the existingtechnology to create microcomputers with an increased printcapability in 1992 (Kim & Mauborgne, 2004). Similarly,Nickelodeon used the existing technology to provide its consumerswith short films for the working class, thus increasing its capacityto exploit the working class clientele. In conclusion, companiesshould seek to create blue oceans instead of venturing the existingindustries that are characterized by stiff competition and lowreturns.
Kim,W. & Mauborgne, R. (2004). Blueocean strategy.Boston, MA: Harvard Business Review.