Introduction
The Blue Ocean strategy reconstructs established models of development, such as the widely used Porter's five forces model. Renee Mauborgne and W. Chan Kim specify two forms of markets wherein economic actors work-- the red and blue oceans. The 'red oceans' pertain to markets that are crowded or saturated. Red oceans are current, established markets. Growth opportunities are limited due to the fact that a large number of economic actors are involved, aggressively trying to expand their position in the market (Kim & Mauborgne, 2015). 'Red' denotes the cutthroat competition, as well as the purchasing consultant, customers, and suppliers who work hard to capitalize on their own market share and profit margins or other indicators of economic performance (e.g. recession, outsourcing) (See Appendix B). Accurately differentiating itself from traditional core models of differentiation focused on cost leadership or quality, the blue ocean strategy empowers organizations to go beyond the current limitations of supply and demand (Kim & Mauborgne, 2015). Businesses must look for and navigate other 'oceans'-- settings -- where they can acquire a dominant position.
'Blue oceans' refer to markets where companies can take a leading position because there are very few or no competitors. This idea transforms the market's structure by generating an unlimited volume of new demand. In essence, blue oceans strategy is the model that argues that a business has a higher chances of succeeding if it will look for ways to penetrate and operate in 'uncontested market places' (Kim & Mauborgne, 2015, p. 13) rather than competing or operating in saturated markets. It is the concept of seeking market spaces that are beyond the bounds of competition by raising and seizing new demand, thus successfully dumping competition (See Appendix B). This paper critically analyses the sustainability of the blue ocean strategy. It specifically answers these two key questions: can companies keep jumping out of the red into blue; and, how do they prevent other companies 'swimming' in their blue oceans?
Creating Blue Oceans
As explained by Mauborgne and Kim, blue oceans can be created by either developing perfectly new businesses or creating a blue ocean in a red ocean by widening the borders of a current industry. Creating a blue ocean is a 'must' for businesses who aspire to expand. A number of aspects, such as market shares, innovation, and globalization are factors guiding businesses toward optimal decisions (Gondek, 2013). The idea is to promote a new demand and avoid the 'red ocean', or fierce competition, as much as possible. In fact, taking up or imitating the business model of a blue ocean company is simpler to envision than to carry out. Due to the fact that blue ocean companies quickly draw in a huge number of customers, they are capable of producing economies of scale quite swiftly, throwing prospective imitators at an instant and long-term disadvantage in terms of cost (Johnson, 2013). For instance, the massive scale economies of Wal-Mart have effectively intimidated those companies planning to copy its business model.
In cases where imitation demands businesses to modify their entire system of operations, socio-political factors within the organization could hamper a prospective imitator's capability to adopt the unique business strategy of a blue ocean model. Airlines, for example, that want to imitate the highly flexible and cost-effective business model of Southwest would have confronted large-scale modifications in pricing, marketing, and routing, as well as organizational culture (Rumelt, 2011). Only a handful of major airlines had the resilience and ability to carry out such massive changes in operations and organizational culture within a short period of time. Copying an entire business model is never a simple undertaking.
The cognitive obstacles can also be a strong competitive advantage. When a business launches an upsurge in value, it quickly gains brand popularity and loyal customers. Studies reveal that even the most expansive and costliest marketing strategies have difficulties dismounting a blue ocean company (de Wit & Meyer, 2010). A perfect case in point is Microsoft-- the company has been exerting efforts to dominate the core of the blue ocean made by Intuit. In spite of all of the attempts of Microsoft and the resources it invested for the accomplishment of the task, it still failed to dethrone Intuit as the market leader (de Wit & Meyer, 2010). Therefore, the primary objective of the blue ocean model is to build value innovation, which involves pushing down the costs while at the same time expanding value for customers (see Appendix A). Simply put, value innovation is the key foundation of the blue ocean model. However, Mauborgne and Kim (2015) explained that value innovation can only be attained if the cost structures, price, and utility of the company are correctly coordinated.
Sustaining the Blue Ocean
Once a company successfully creates its blue ocean, another challenge immediately sets in-- how to sustain or protect its blue ocean from competitors. Some experts claim that the blue ocean strategy is strongest in saturated or deteriorating markets. Thus, in order to ensure sustainability, a business must target an entirely new customer base. Mauborgne and Kim (2015) stress that businesses not simply have to outwit or surpass their competitors, but to totally overpass them by seeking and penetrating new and unchallenged markets. Thus, the blue ocean can be protected from would-be competitors or imitators by implementing these two key steps (Zhexembayeva, 2014): be informed or updated about what the customers look for when they purchase a product/service; lead and empower managers who are capable of restructuring market situations in a basically new way.
On the other hand, some researchers claim that the blue ocean strategy can be sustained by treating it as a process innovation. In order to give value innovations to customers-- reducing cost and improving differentiation-- a business has to carry out process innovation in a completely new way (Nicolas, 2011). According to this point of view, there are several crucial steps that must be implemented in order to strengthen or sustain the blue ocean strategy. First, integrate performance into strategy. The answer to sustainable success is to place high levels of customer satisfaction at the centre of the business model. This implies that the execution of the blue ocean strategy must be incorporated into the current, continuous processes of the organization. The members of the organization should be motivated to consistently think innovatively and nurtured with the commitment to furnish improvements and strengths.
Second, eliminate major organizational obstacles. All internal problems in an organization must be resolved so as to effectively execute the selected strategy. The absence of cooperation within the group and an emphasis of individualistic attitude will simply generate additional obstacles. Process discrepancies between units or teams must be resolved immediately. Third, the strategic course must be correctly established (Kabukin, 2014). The line-up in which the entire strategic plan is to be carried out has to be structured accurately to provide the best value to the customers. Every experience that a customer has to undergo must be structured in the correct sequence and carried out in this same sequence. The goal is to focus on the customer experience as the genuine, indispensable process.
Fourth, expand outside current demand. A usual business method is placing emphasis on existing customers and a resulting emphasis on bigger market segmentation. The actual potential for growth lies in current and prospective customers. To sustain the blue ocean, the company has to stay focused (Kim & Mauborgne, 2015). Fifth, do not lose sight of the grand picture. The company has to bear in mind the entire grand picture, instead of focusing solely on numbers. There is constantly the threat of losing sight of the big picture because of too much fixation on the numbers and directing the company into the wrong path. The top priority must be the customers’ actual needs and ways to provide them. And, lastly, restructure market boundaries. So as to view the business from a new point of view and transform current boundaries, an organization can start by identifying correctly where the process begins and ends for the customer (Kim & Mauborgne, 2015). This can contribute to the expansion of value chains and totally new market opportunities. In essence, the blue ocean can be protected and sustained through a comprehensive, integrated understanding of people, profit, and value (Kennedy, 2014), and incorporating all of these into the strategy.
What makes the blue ocean strategy more relevant to the industry today is its focus on innovation. Its success in the actual business world is attested by the companies that successfully created their blue oceans: Apple, Southwest, Body Shop, and Cirque De Soleil, to name a few (de Wit & Meyer, 2010). In addition, the advantage of the blue ocean strategy over the other strategy tools (e.g. Porter's five forces, PESTEL, Benchmarking, Value Chain Analysis, SWOT analysis) is its orientation toward a different form of competition. Its goal is not to outwit competitors, but to eliminate competition altogether by re-creating industry boundaries (Osterwalder & Pigneur, 2009). On the other hand, other strategy tools, like Porter's five forces, are placing more emphasis on the aspects that would give a competitive advantage to a company in current 'red oceans', and they are usually focused on the micro-environmental aspects influencing companies operating in a given industry. Aspects like threat of substitution, power of supplier, power of consumers, new entrants, and competitors are aspects which once overcame would not automatically push the company to the top because businesses are not a stagnant, immobile entity (Niciejewska & Dimitrov, 2009). In contrast, the blue ocean strategy can remain uncontested for many years provided that the necessary principles are properly carried out.
Conclusions
The blue ocean strategy is truly a revolutionary concept for the corporate world. It stands in stark contrast to other strategy tools because of its emphasis on innovation rather than competition. However, creating a blue ocean is not an easy task and, more importantly, sustaining it is much more challenging. A blue ocean must be protected from competitors by focusing on low cost and high differentiation. The product and/or service of a blue ocean company must be inimitable-- cannot be copied or imitated. Yet, apparently, the secret lies in the perfect alignment of people, profit, and value. Achieving and sustaining a blue ocean depends on continuous innovation and the integration of process into the strategy.
References
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Zhexembayeva, N. (2014) Overfished Ocean Strategy: Powering Up Innovation for a Resource-Deprived World. San Francisco, CA: Berrett-Koehler Publishers.
Appendix A
Value Innovation
*image taken from Kabukin, 2014, p. 21
Appendix B
Differences between Red Oceans and Blue Oceans
*image taken from Nicolas, 2011, p. 19
