Benefits of Blue Ocean Strategy - Essay Example

Blue Ocean Strategy Blue Ocean Strategy The blue ocean strategy is a book based on two types of business marketing strategies ly the blue ocean strategy and the red ocean strategy (Kim & Mauborgne, 2013). The idea behind the book is the advantages of the blue ocean strategy over the red ocean strategy. Consequently, it exclusively advocates for the blue ocean strategy and favors its adoption. With the business world growing bigger, many people are coming to terms with increased application of business knowledge. In addition, the emerging of companies are producing the same type of product or offering similar service. Due to this environment, the struggle for success in the business world has become a battle among the competing interests (Kim & Mauborgne, 2013). Originally, the red ocean strategy was the most used mode of emerging top of the competition. However, the book talks about a new and different approach that is the blue ocean strategy. The terms blue ocean strategy is metaphorical to the authors’ envisioning and perception of the strategy in physical terms. The Red Ocean Strategy The red ocean strategy as described in the book refers to the previously most popular way of beating the competition in the present environment. The red ocean strategy represents an environment where the rules of competition are defined and set. In addition, a well-known market space exists (Kim & Mauborgne, 2013). The only way for companies to beat the competition in the red ocean strategies is by fighting and struggling to outdo each other by taking actions that make their products more appealing to the market. The actions taken in the end gradually reduce the profit margin of the products. Methods of winning in the red ocean strategy involve approaches such as lowering the price of commodities to be cheaper than the ones in the market (Kim & Mauborgne, 2013). An action like this puts pressure on other competitors in the market to take a similar action culminating into a chain effect. Consequently, the price of the product or service lowers further and so does the profit margins of the products or services. The author envisages the red ocean strategy as a gory competition to acquire a bigger market share of the product or service. The authors describe the main differences between the red ocean strategies and the blue ocean strategies. The approach towards market space whereby the red ocean strategies focuses on competing in existing market space while the blue ocean strategy relies on creating new uncontested market space which involves a great deal of innovation (Kim & Mauborgne, 2013). The second difference is that the red ocean strategy aims at beating the competition while the blue ocean strategy involves using innovation to make the competition powerless and irrelevant. The third difference is that while in red ocean strategy the aim is to exploit existing demand, the blue ocean strategy aims at creation of new products to meet new niches in the existing market. Disadvantage of the Red Ocean Strategy The red ocean strategy is an unfavorable method of approaching the market competition due to its negative impacts on the profitability of the company. The effect of lowering the prices of commodities and services is continuous and gradual. The blue ocean strategy locks the company in a continuous battle for market space that in the end becomes tedious. The chance of success reduces each day because several new companies are entering the market, making the competition strenuous. This can eventually lead to very minimum profit margins because the supply has surpassed the demand. The Blue Ocean Strategy Away from the issues affecting the red ocean strategy, the blue ocean strategy involves diverting competition by pursuing new markets through diversification. In the blue ocean technology, the term is a representation of a new market space free from the bloody competition in the red ocean strategy. For example, a firm offering mobile phone communication services in an environment of intense competition can search the market for gaps. Other services vital to the population might be missing, for example, data services of mobile money transfer. In this way, the company will appear to the customers as a one-package service provider and a suitable choice. This can be achieved without any price reductions. According to the Harvard business review, blue oceans “denote all the industries not in existence today” (Harvard Business review, 2004). Because the demand is created, there exists growth opportunity which is profitable and rapid. The Harvard business review further states that these market spaces in the blue ocean are mostly created from within the red ocean when a company breaks the boundary of its products or services. An example is given in the book about the Cirque Company. It shows how this alteration of boundaries is done. Traditionally, theater and circus were separate businesses but Cirque managed to put them under one boundary and exploit a blue ocean leading to its success (Kim & Mauborgne, 2013). The blue ocean strategy website indicates that the focus of this approach is pursuing diversification at the same time maintaining a relative low cost of the services or products. The framework for the blue ocean strategy is based on four major principles that are raising the relevant factors above existent standard of the industry and getting rid of factors that the industry has for a long time been competing on that deserve to be eliminated (Harvard Business review, 2004). Other principles are reducing factors are below the standard of the industry and creating the factors that are not on offer by the industry. According to Media Marketing organization (2012), “Companies that do their operations in the blue ocean surroundings mostly invite new groups of customers. The blue ocean companies can accomplish things through pursuing differentiation and low cost at the same time. Therefore, this leads to the formation of economic barriers.” Consequently, the interest in the companies’ products and services are created. The need to fight in the red ocean competition will not be existent. Conclusion The blue ocean strategy appears to be advantageous compared to the red ocean strategy. It is a brilliant way that companies can use to avoid loss and strains caused by the red ocean competition, increase their product or service range and profit margin. The marketing topics that are explored include profit maximization, target marketing and innovation. The blue ocean strategy calls for high innovation abilities, examination and knowledge of the market to identify its gaps. A disadvantage arises from the fact that this act of differentiation might require input of more capital into the investment. This is a factor that many companies may find challenging. References Kim, C. W. & Mauborgne, R. (2013). Blue Ocean Strategies. Massachusetts: Harvard Business Review Press. Harvard Business review. (2004). Blue Ocean Strategy. Retrieved from http://hbr.org/2004/10/blue-ocean-strategy/ar/1 Media Marketing organization. (2012). Benefits of Blue Ocean Strategy. Retrieved from http://www.fusemediamarketing.com/benefits-of-blue-ocean-strategy/ Read More