The Blue Ocean Concept - Coursework Example

The Blue Ocean Concept Name Institution Course Tutor Date Sustainability in business is an assurance to growth compelled by the development of new markets and innovation. To ensure sustainability, organizations try to look for ways to ensure they exhibit economic viability and social responsibility, as well as comply with environmental regulations. Through the Blue Ocean Strategy (BOS) businesses can become sustainably profitable. Organizations can use BOS to enter into uncontested markets where there is no competition and the possible for growth is minimal, but as they continue innovating in order to become sustainable (Kim and Mauborgne 2005b). Therefore, there is no need for companies to continue jumping out of red into blue oceans. Using innovation to achieve sustainability through BOS can be used as an avenue through which to create new market niche which provides value to the company sustainably. This essay critically discusses how companies can become more competitive and sustainable through innovation in the blue oceans, in stead of dropping them upon eventually becoming red. But first, it defines the sustainability and blue ocean concepts, and provides a critical analysis of the Blue Ocean Strategy. In the context of this essay, sustainability is the ability of a company to sustain itself for the foreseeable future (Alhaddi 2014). It represents the development and evolution of the society in a way that promotes a wealthy and more comfortable world while reserving the natural environment and existing culture. Sustainability has a positive impact on profitability, production, cost reduction and quality enhancement (Alhaddi 2014; Sheehan and Vaidyanathan 2009). Alternatively, blue ocean strategy builds on the notion of moving into new markets where there is no competition and opportunity for growth is enormous. It is based on the assumption that the business world comprise of two spaces, the red and the blue ocean (Nicolas 2011). The red ocean is a known market niche and is characterised by very stiff competition. Blue oceans are the unknown market spaces and there exist no competition in these markets but the potential to grow is huge (See Appendix 1). Creating blue oceans, according to Kim and Mauborgne (2005a) make companies to significantly grow. Critically looking at the guidelines provided by Kim and Mauborgne (2005a) it is observable that they are insufficient for full implementation of BOS into practice. Additionally, the link between the BOS principles and its implementation is not clear. According to Kampa, Cziulik and Amodio (2013) addressing these gaps would provide adequate support for application of BOS. Ideally, BOS tries to restructure the existing niches supplied by available products. In this regard it can be argued that this model does not create new demand. In stead, it adjusts the shape of the prevailing demand by attracting buyers from various markets places (Kabukin 2014). Consequently, these buyers would no longer purchase the offers meant for a certain niche in favour of the other niche. For example, an airline company may produce a service that resembles a train, car or a bus, all at once. Alternatively, wine making company may produce a wine that resembles cocktails and a beer (Kampa et al 2013). This implies that the company would capture both buyers from the original offer and those acquired from the new and unexpected offer. Additionally, the inference drawn from this illustration is that BOS is highly characterized by de-segmentation which is different from the traditional practice of segmentation. According to Cirjevskis, Homenko and Lacinova (2011) the construction of the target market is based on the existing similarity on the value gaps and value attributes identified when certain markets are being sought. Under the BOS, the established structure has to be redefined in scope as way to create differentiation attributes. Kampa et al (2013) argue that is likely to enhance a definition of a market not yet explored. The perception is that practically, the value gaps arises when a conflict between supply and demand exists and not due to creating an offer. Important to note though is that the BOS seeks to discover market spaces of known opportunities which exist in red oceans (Nicolas 2011). It starts from a chaotic environment which has well-defined competition and this point of commencement is often determined by a company that exists. Despite this fact, the blue concept fails to suggest a sector where the approach it proposes can be applied (Kampa et al 2013). Therefore, it means that a company that wants to implement BOS has to define its sectors of interest. From the entrepreneur’s perspective, this could be so problematic. The development of the BOS was highly influenced by Porter’s theory of the five forces. Contrary to Porter’s theory that successful businesses can either be low cost providers or players in the niche market (Porter 2008), Kim and Mauborgne (2005b) argue that successful businesses can be low cost providers and at the same time participants in the niche market spaces. Porter’s theory explains that only a single strategy needs to be followed so that a company can maintain focus and direction (Porter 2008). This argument is opposed in the BOS where it is argued that companies often compete with each other viciously using every action taken by these companies. In stead of value innovation differentiating two competencies, it recognizes the importance of both high value and cost reduction (Nicolas 2011). Generally, the BOS and Michael Porter’s work have comparable message and attributes. Both theories seek for uncompetitive market spaces. Additionally, similar to BOS, Porter’s theory recognizes differentiation as a strategy companies can use to provide a unique mix of value to their business processes (Kabukin 2014). Ultimately, based on the common fact that theories must not be completely perfect in order to be forceful and accepted, it is right to argue that the BOS is to a large extent applicable. This leads us to the next discussion on how companies can use the BOS to discourage others from joining their newly created market spaces and most importantly remain sustainable in blue oceans. Companies can use BOS to create new market niches that are sustainable through innovation. As Alhaddi (2014) argues the successful performance of the company depends on having core competences. Although it varies based on the company, innovation is one of the major competences needed by every company and it is one of the metrics used to reveal a company’s prospects of growth. Innovation is the basis of BOS and a facilitator of differentiation that enables companies to withstand competition in their blue oceans (Kim and Mauborgne 2005b). To become sustainable in the new market spaces, companies need to use innovation to create new opportunities that is does not benefit only the business but also the stakeholders. Innovation is the engine sustainable growth as connotes Dervitsiotis (2011) and cannot be separated from value. A company that pursues innovation is able to utilize the new value proposition in the form of product, process, or how it does business (Parvinen, Aspara, Hietanen and Kajalo 2011). In fact, innovation is a basis upon which companies achieve sustainable value (SV) and value innovation(VI) (See Appendix 2), which are important in preventing new entrants into the blue ocean as argues Alhaddi (2014). The idea of SV involves creating positive value to stakeholders and shareholders. When created, SV produces societal and environmental, as well as business benefits are produced. From the BOS view, companies create value when their cost structure is low while value the buyer gets from the companies’ ofeferings is higher. Alternatively, VI occurs when innovation, price, and cost are aligned in the company (Kim and Mauborgne 2005b). Ultimately, companies that use innovation to establish and maintain brand identity, and achieve maximum value may become competitive advantageous in their new market spaces. Studies indicate that innovation in sustainability helps companies to create wealth, opportunities for growth, and financial benefits due to product differentiation, grabbing new marketing opportunities, and cost reductions (Cirjevskis et al 2011; Lubin and Esty 2010; Marcus and Fremeth 2009). Therefore using innovation in blue oceans can be used to deter other companies from entering the market because for the abilities the company already in the new market establishes. However, to successfully develop new ways of thinking, companies should ensure their innovations are aligned with the price, cost, and utility of a product or service in question. As Sheehan and Vaidyanathan (2009) connote, innovative offerings is likely to help companies to create new markets where there is high potential for long-term profitability. Being inseparable from value and an integral part of BOS, innovation helps companies to standout in the niche markets (Dervitsiotis 2011). Therefore, to protect the blue oceans from competition, companies have to focus on developing new and compelling value propositions which are unique and this is only possible through innovation (Parvinen et al 2011). By being innovative in creating value for buyers in blue oceans companies may improve their competitive advantage and threaten others from entry. Conclusively, it appears that Kim and Mauborgne gave birth to a strong theory which has not yet been adequately tested. This makes it appropriate to build up some doubts about it relevance. Nevertheless, the BOS approach seems unique when compared with traditional ways of recognizing opportunities as it requires restructuring market sectors. Importantly, companies should be able to sustain themselves for the long-term when they move into blue oceans. Yes, companies can use BOS to create new markets, but maintaining these markets free from entry by competitors may prove very challenging. It is by building sustainability through innovation that companies can increase their production, profitability, quality, product and service differentiation, value creation, as well as reduce cost in order to standout in their blue oceans and prevent other companies from entry. Reference List Alhaddi, H., 2014. Blue Ocean Strategy and Sustainability for Strategic Management. International Proceedings of Economics Development and Research, 82, pp.125-132. Cirjevskis, A., Homenko, G. and Lacinova, V., 2011. How to Implement Blue Ocean Strategy (BOS) in B2B Sector. Business. Management, and Education, 9(2), p.213. Dervitsiotis, K., 2011. The challenge of adaptation through innovation based on the quality of the innovation process. Total Quality Management, 22(5), pp. 553-566. Kabukin, D., 2014. Reviewing the Blue Ocean Strategy. Is the Blue Ocean Strategy valid and reliable? University of Twente. Kampa, J.R., Cziulik, C. and Amodio, C.C.E., 2013. A critical analysis on the Blue Ocean Strategy and an approach for its integration into the Product Development Process. Management Decision, 10(2), pp. 79-86. Kim, W. C. and Mauborgne, R., 2005a. Value innovation: a leap into the blue ocean”, Journal of Business Strategy, 26(4), pp. 22-28. Kim, W.C. and Mauborgne, R., 2005b. Blue Ocean Strategy: How to Create Uncontested Market Space and make the Competition Irrelevant. Harvard Business School Press. Boston, MA. Lubin, D. and Esty, D., 2010. The sustainability imperative. Harvard Business Review. pp. 42-50. Marcus, A. and Fremeth, A., 2009. Green management matters regardless. The Academy of Management Perspectives, 23(3), pp. 17-26. Nicolas, G., 2011. The evolution of strategic thinking and practices: Blue Ocean Strategy. Linnaeus University: School of Business and Economics. Parvinen, P., Aspara, J., Hietanen, J. and Kajalo, S., 2011. Awareness, action and context-specificity of blue ocean practices in sales management. Management Decision, 49(8), pp.1218-1234. Porter, M. E., 2008. The five competitive forces that shape strategy. Harvard Business Review. Sheehan, N. and Vaidyanathan, G., 2009. Using a value creation compass to discover Blue Oceans. Strategy and Leadership, 37(2), pp. 13-20. Appendix 1: Red ocean and Blue Ocean comparison Source: Kim and Mauborgne 2005 Appendix 2: Innovation’s Conceptual Framework Source: Alhaddi 2014 Read More