Strategic Business Moves
Zigfred Diaz
One afternoon as my friend and I talked business strategy he told me a bit about Blue Ocean Strategy. I decided do more research in the internet on what it is all about. 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. According to the book, Blue Ocean strategy is a corporate strategy that aims to tap unclaimed markets making competition irrelevant.
In the book, "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 since it is not yet too crowded. In contrast, "Red Ocean" refers to a market where competition is very high. The market is considered as very crowded already since almost everybody is producing the same type of service and the same kind of goods.
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.
The market for mobile phones has already been saturated by both Smart and Globe.Sun Cellular being a new player, did not have much market to start with. In order to survive as a company, what they did was to create a "new market" by adding value to products already found in existing markets. They did this by making calls within their network free. As a result a "new market" has opened. Since majority of the Filipinos are cost conscious, most of them now have two cellular phones or two sim cards in a dual sim phone. One for the other networks and the other one for Sun Cellular.
The Gokongwei owned Cebu Pacific applied the Blue Ocean Strategy by adding "value" to what people really want, which is to "fly." In order to do this, airline fares must go down since this is what people care about. So Cebu Pacific slashed down their fares to give value to what people really want. In order to make up for this loss, they eliminated other costs such as newspapers a hot meal or a snack. This move, caused people to buy into this "new market."
In Traditional Business strategy we talk about "crushing the competition" whereas in Blue Ocean Strategy we talk about "Creating new markets with little or no competition." Instead of "Strategic Planning" Blue Ocean Strategist resort to "Strategic thinking." Instead of "cutting prices" to capture a market, Blue Ocean Strategy is to add "value" to products and services to claim an untapped market.
According to the critiques, the Blue Ocean Strategy has already existed a long time ago. They further contend that the ideas that are said to be unique to the Blue Ocean Strategy are already used in traditional business strategies.
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.
Know more about http://www.zdiaz.com/ business strategy. Visit the blog of business strategist Zigfred Diaz. He is Vice president for operations for a group of family owned corporations. He is also a Financial & Real estate broker, lawyer, law professor & writer.
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