In the current business world, companies in the same industry tend to compete viciously with each other to ensure they are ahead in every possible aspect. The competition might kick some out of business and may bring higher returns to others. This traditional working environment is described by the “red ocean” conditions, which helps define the blue ocean strategy as the opposite that introduces a concept where a business can operate ‘solely’ cutting out all the competitors in the existing industry. A company that applies the blue ocean strategy principles sets the pace in its industry and creates unique products and as a result profits from the lucrative new markets. Therefore, the blue ocean strategy can be defined as a concept that is introduced to business to help it in eliminating all the competitive forces to maximize its profits by greater margins.
The central concept behind the blue ocean strategy is that it represents the simultaneous pursuit of the higher product differentiation and low costs, which in turn makes competition irrelevant. To support this theory, the authors of the book ‘blue ocean strategy’, Renee Mauborgne and W. Chan Kim urge their readers to consider the business climate of about 20 years ago and the many business opportunities that have risen ever since. Many companies have come into play and more which are unknown today would rise in the future. The point being made here is that companies have the capacity to create new industries and recreate the already existing ones. Kim and Mauborgne claim that the blue ocean strategy has a specific goal of simultaneously attracting large numbers of customers and raising the cost of competition to change the dynamics of the existing industry (Kim & Mauborgne, 2005).
To discover and apply the blue ocean strategy, Mauborgne and Kim argue that entrepreneurs and businesses should consider the “Four Action Framework” which is used to reconstruct the buyer value element in coming up with a new value curve. To break the existing trade-off between the low costs and differentiation and to come up with a new value curve, the framework should possess the following four primary questions:
Create: Which factors need to be set up that have never been offered before in the industry?
Raise: Which factors need to be raised above the standards set by the current industry?
Reduce: Which are the factors that need to be reduced below the standards set by the current industry?
Eliminate: Which factors has the industry competed majorly on that need to be removed (Arline, 2015).
A business example that uses the blue ocean strategy is the Nintendo Company. What the company did was to reduce the cost structure and increase value for the buyers which are the central principle behind the blue ocean strategy. In a message displayed in the lecture video conducted at the University of San Diego, the president of Nintendo stated that at the company, they are not in competition with Sony’s PS4 or Microsoft’s Xbox, but they are battling the indifference of individuals who have no interest in video games. They want to appeal to mothers who don’t want consoles in their living rooms and to the elderly and the young women. Looking at the example posed by the Nintendo Company, they are in the same industry as Sony and Microsoft regarding video games, but they have eliminated that aspect of competition as pointed out in the USD School of Business Administration. lecture video. This approach is the backbone of the blue ocean strategy.
- Arline, K. (2015, April 1). Blue Ocean Strategy: Creating Your Market. Retrieved July 26, 2016, from http://www.businessnewsdaily.com/: http://www.businessnewsdaily.com/5647-blue-ocean-strategy.html
- Kim, W. C., & Mauborgne, R. (2005). The Blue Ocean Strategy. How to Create Uncontested Market Space and Make Competition Irrelevant, 1-257. Retrieved July 26, 2016, from http://www.cohep.com/contenido/biblioteca/portaldoc25_3.pdf?c23d992ab3613e7bb1185fcc32b09e7f
- USD School of Business Administration. (2010, July 21). Blue Ocean Strategy: Making the Competition Irrelevant. Retrieved July 26, 2016, from https://www.youtube.com/watch?v=zrGOBdVm-KE&feature=youtu.be