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Blue Ocean Strategy . . . The Future Trend Of Business Strategy?

Jan 5, 2008
A friend and I talked about a unique business strategy over a cup of coffee one afternoon. I was so intrigued by the idea so I did a little bit of research on the subject. This strategy is what is known as the Blue Ocean Strategy. The Blue Ocean Strategy is a corporate strategy that aims to tap unclaimed markets making competition irrelevant. The strategy is embodied in the book entitled "Blue Ocean Strategy" by Professors W. Chan Kim and Renee Mauborgne and Published by Harvard Business School Press.

The authors explained that "Blue Ocean" refers to an untapped market, a market wherein there is only little or no competition at all enabling anyone to claim the market for his own. The opposite of this is "Red Ocean" wherein competition is very high. The market is considered as very crowded already since almost everybody is producing the same type of goods or services.

The Blue Ocean strategy is simply to innovate something; something that makes people give a higher value for a certain product or service. Since doing this would require additional cost, the cost that is incurred by the value added is reduced by eliminating product or service features that the market does not really care about.

To understand the startegy, a "local" or Philippine based example must be cited. The strategic moves of the Gokongwei group of companies is an example of how the Blue Ocean Strategy was used here in the country. The Gokongwei group owns airline Cebu Pacific and Mobile phone company, Sun Cellular among other companies.

Since the market for mobile phones has already been saturated by both Smart and Globe, what Sun Cellular did is to create a "new market" by adding value to products already found in existing markets. As a result of this "added" value, (By making sun to sun calls free) a new untapped market was opened. It could be said that Sun Cellular is not competing directly with Globe and Smart but rather they have raised awareness among the people to buy into this "new market." As a result, most people in the Philippines have now two cellular phones or two sim cards in a dual sim phone. One for Sun cellular, and the other for other networks.

What people really want, is to "fly" and in order to do this fares have to go down. This is exactly what Cebu Pacfic did in the Airline industry. They created a "new market" by slashing down their fares, since this is really what people want. People don't really care about a a hot meal or a newspaper. What they want is to fly. Eliminating these other cost, helped Cebu Pacific give value to what people really want, forcing people to buy into this "new market."

Blue Ocean Strategist resort to "Strategic thinking" rather than "Strategic planning." Adding "value" to products and services to claim an untapped market is what is resorted to instead of referring to it as "cutting prices" to capture a market. Its not about "crushing the competition" but rather its about "Creating new markets with little or no competition."

Critiques may say that the Strategy has already existed a long time ago and that principles that are said to be unique to the strategy can be found in other traditional business strategies as well.

The arguments of the critics are flawed. It should be noted that a new theory is always built upon something that has already been accepted as a theory or a scientific principle for a long period of time. (Just like the theory of relativity rest upon the foundations of the principles of gravity, thermodynamics, electricity etc.) Our mode of discovering something is built upon the knowledge that has been universally accepted. It is most certain that the strategy is here to stay no matter what the critics say. Clearly, the Blue Ocean strategy will have an impact on the way future managers leaders and entrepreneurs will do business.
About the Author
Know more about business strategy. Visit the blog of business strategist Zigfred Diaz. His blog deals with diverse topics such as law, leadership, management, entrepreneurship, financial management, investments, technology, internet marketing, blogging, faith, life and living.
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