Blue Ocean Strategy
The Harvard Business Review “Blue Ocean Strategy” by W. Chan Kim and Renee describes the “business universe” and its two “distinct kinds of space,” the red ocean and the blue ocean. The article explains how the market space if divided by these two oceans. The red ocean symbolizes the industries that are currently in present in the market. These industries serve as models for current competitors as well as future ones. On the other side, blue oceans are industries that are “not in existence today.” These industries are unknown and could be developed from red oceans or from completely new industries. The main difference between these two types of markets ...view middle of the document...
All companies have the “capacity to create new industries and re-create existing ones.” Now days, the opportunities for new industries are greater thanks to the technological advances and the unlimited communication around the world.
Three important aspects of blue oceans described in the article are:
• Blue oceans are not about technology innovation. Although technology influences the creation of new industries, it is not the determining factor. Management’s strategies and the use of technology are the factors that influence the creation of new industries.
• Incumbents often create blue oceans and usually within their core business. As previously discussed, blue oceans are sometimes the product of industries found within red oceans. Existing industries have the ability to restructure their core business to create new industries.
• Company and industry are the wrong units of analysis. When analyzing blue oceans, company and industry are meaningless. A company may not stay successful for a long time; however, the strategies and decisions that made the industry part of the blue ocean are the aspects that support the analysis of blue oceans.
• Creating blue oceans build brands. New industries create demand and introduce reforming ideas to the market. If a company introduces an idea that’s is hard or impossible to imitate, it will “create brand equity” that could last for years.
The article uses the example of Cirque du Solei throughout the text to describe the strategies of blue ocean. Cirque du Solei used aspects of different industries within the red ocean to form a completely new industry. The company reevaluated all aspects of the circus and included some features of the theater and the ballet, among others, to create the new industry. Cirque du Solei pursued “differentiation and low cost simultaneously” by listening to customers’ needs.
Three most critical issues
The most critical issues discussed in the article are: the importance of distinguishing between red and blue oceans, being able to recognize consumer needs, and understanding that blue oceans are the engine of growth. The first step for companies to move from red oceans to blue oceans is to realize the difference between these two. Many times, managers and corporates are too busy analyzing how to continue competing with their rivals and they miss the opportunities to come up with new ideas to reinvent their industries. Most executives believe that in order to stay competitive they need to decide between differentiation and low cost. It is not until they understand blue oceans that they realize that the two can be achieved simultaneously. Additionally, to better understand the changes and growths in industries, one should comprehend the difference between red and blue oceans. Once companies have passed this stage and understand the difference between the two oceans, companies should focus on consumer needs to create new industries. Instead of putting all attention on what...