Blue Ocean Strategy - Essay Example

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Blue ocean strategy Name: University: Course: Tutor: Date: Blue ocean strategy Introduction According to Kim and Mauborgne, competition in a crowded market is not the way to sustain higher performance thus firms must seek opportunities to create blue oceans of the uncontested markets…
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Blue Ocean Strategy
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Download file to see previous pages Unlike red oceans, blue oceans create demand from the red oceans by breaking the boundaries of competition (Kim and Maubourgne, 2005). For instance, companies like music recording multinationals, management consulting and pharmaceuticals were hardly heard of in the last 100 years. In this case, companies will have the opportunity to re-create others in order to reflect the emerging realities in economic growth and blue oceans. The authors assert that technological advancements, increased deregulation of markets and improved industrial productivity will enhance creation of blue oceans. Saturation of the developed markets has resulted in to price wars and shrunk profit margins thus the need of a blue ocean strategy (Niciejewska and Dimitrov, 2009). Surprisingly, the authors point out that 86 percent of the surveyed companies seem to be comfortable in red oceans since they have only line extensions while only 14 percent are committed at creating new markets. It is interesting that the survey found out that 14 percent of the firms that invested in new market development delivered 38 percent of the revenues and impressive 61 percent of total profits. On the contrary, the 86 percent of firms concentrated on line extensions thus delivering 62 percent of the total revenues and only 39 percent of the total profits (Kim and Mauborgene 4). ...
The authors provide an example of Japanese companies of 1980s due to decline of Western companies in droves. The authors agree that competition is important, but companies must attain competitive-advantage and develop markets with minimal or no competition (Warren, 2008). The authors go ahead to provide the logic behind the creation of blue oceans. The article outlines that new technology and innovation will create blue oceans. Some of the blue oceans that have been created by new technology include Ford Model IT and Apple Personal computers. Incumbents also create blue oceans within the existing business like AMC multiplex of 1995 and Palace theaters of 1914. The authors assert that strategic moves define blue oceans and no the size of the industry or companies. Accordingly, blue oceans build existing brands through creating brand equity just like Ford’s Model T that still benefits the company today (Kourdi, 2009). The article differentiates the red oceans from blue oceans since Red Ocean strategies compete in the current market space while blue oceans create new uncontested markets. Red oceans aim at beating competition while blue oceans desire to make completion irrelevant. In addition, blue oceans break the value to cost trade off unlike red oceans that make the value to cost trade-off (Koontz and Weihrich, 1990). The authors offer a deep explanation of blue ocean strategy by asserting that such companies reject the fundamental strategies of competition that aim at creating more value for customers or lowering operating costs. The authors offer an example of Cirque du Soleil since at the time of market entry Circuses were benchmarking without raising market revenues. Cirque did not follow the ...Download file to see next pagesRead More
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