The new chapters in the expanded edition of the book deal with the issues of how to develop and align the three strategy propositions of value, profit and people, how to sustain and renew blue ocean strategy at both the business level and the corporate level, and how to avoid red ocean traps that keep organizations anchored in existing market space even as they attempt to create new market space.
Red oceans represent all the industries in existence today — the known market space. In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced.
Products become commodities or niche , and cutthroat competition turns the ocean bloody; hence, the term "red oceans".
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Blue oceans, in contrast, denote all the industries not in existence today — the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored.
The aim of value innovation, as articulated in the article, is not to compete, but to make the competition irrelevant by changing the playing field of strategy. The strategic move must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market. The Four Actions Framework is used to help create value innovation and break the value-cost trade-off.
Value innovation challenges Michael Porter 's idea that successful businesses are either low-cost providers or niche-players. Instead, blue ocean strategy proposes finding value that crosses conventional market segmentation and offering value and lower cost. Educator Charles W. Hill proposed a similar idea in and claimed that Porter's model was flawed because differentiation can be a means for firms to achieve low cost.
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He proposed that a combination of differentiation and low cost might be necessary for firms to achieve a sustainable competitive advantage. Many others have proposed similar strategies. For example, "competing factors" in blue ocean strategy are similar to the definition of "finite and infinite dimensions" in Funky Business.
Just as blue ocean strategy claims that a red ocean strategy does not guarantee success, Funky Business explained that "Competitive Strategy is the route to nowhere". Funky Business argues that firms need to create "sensational strategies". Kim and Mauborgne explain that the aim of companies is to create blue oceans, that will eventually turn red.
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This is the same idea expressed in the form of an analogy. Kim and Mauborgne claim that blue ocean strategy makes sense in a world where supply exceeds demand. Kim and Mauborgne argue that while traditional competition-based strategies red ocean strategies are necessary, they are not sufficient to sustain high performance. Companies need to go beyond competing. To seize new profit and growth opportunities they also need to create blue oceans.
The authors argue that competition based strategies assume that an industry's structural conditions are given and that firms are forced to compete within them, an assumption based on what academics call the structuralist view, or environmental determinism. To sustain themselves in the marketplace, practitioners of red ocean strategy focus on building advantages over the competition, usually by assessing what competitors do and striving to do it better.
Hence, competition, the supply side of the equation, becomes the defining variable of strategy. Here, cost and value are seen as trade-offs and a firm chooses a distinctive cost or differentiation position. Because the total profit level of the industry is also determined by structural factors, firms principally seek to capture and redistribute wealth instead of creating wealth. They focus on dividing up the red ocean, where growth is increasingly limited. Blue ocean strategy, on the other hand, is based on the view that market boundaries and industry structure are not given and can be reconstructed by the actions and beliefs of industry players.
This is what the authors call the reconstructionist view. To them, extra demand is out there, largely untapped. The crux of the problem is how to create it.
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This, in turn, requires a shift of attention from supply to demand, from a focus on competing to a focus on value innovation — that is, the creation of innovative value to unlock new demand. This is achieved via the simultaneous pursuit of differentiation and low-cost. Competition in the old game is therefore rendered irrelevant. By expanding the demand side of the economy, new wealth is created. Such a strategy therefore allows firms to largely play a non—zero-sum game, with high payoff possibilities.
Some examples of companies that may have created new market spaces in the opinion of Kim and Mauborgne include: [ citation needed ]. Reports of businesses using blue ocean strategy concepts include: [ citation needed ]. Since Blue Ocean Strategy was published in it has been translated into 43 languages and has sold over 3.
While Kim and Mauborgne propose approaches to finding uncontested market space, at the present there are few success stories of companies that have actively applied their theories. One success story that does exist is Nintendo , who first applied the blue ocean strategy to create the Nintendo DS handheld game system , which was the first portable gaming system to offer dual-screen gaming and a touch screen in In , Nintendo released the Wii , which used unique motion controls.
The 3DS is Nintendo's third endeavour for its blue ocean strategy. Its first two attempts, the Nintendo DS and Wii, were wildly successful, becoming some of the biggest selling platforms in history. Nintendo revealed their Blue Ocean Strategy during an E3 press conference during the hype build-up of the Wii. With just one case study, however, this hole in their data persists despite the publication of value innovation concepts dating back to Hence, a critical question is whether this book and its related ideas are descriptive rather than prescriptive.
The research process followed by the authors has been criticized on several grounds. Additionally, blue ocean strategy cannot be identified as true causation for success. They defined this success as a significant drop in crime in the City of New York after Bratton took office in Many social scientists would disagree that it was Bratton's policies that led to crime reduction: rather, the city was simply part of a nationwide trend in decreasing crime.
Brand and communication are taken for granted and do not represent a key for success. Kim and Maubourgne take the marketing of a value innovation as a given, assuming the marketing success will come as a matter of course. It is argued that rather than a theory, blue ocean strategy is an extremely successful attempt to brand a set of already existing concepts and frameworks with a highly "sticky" idea.
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This metaphor can be powerful enough to stimulate people to action. The concepts behind the Blue Ocean Strategy such as the competing factors, the consumer cycle, non-customers, etc. Many of these tools are also used by Six Sigma practitioners and proposed by other management theorists. Prahalad , which was published in From Wikipedia, the free encyclopedia. Blue Ocean Strategy First edition cover. Dewey Decimal. This section possibly contains original research. Please improve it by verifying the claims made and adding inline citations.
Statements consisting only of original research should be removed.
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