Circus industry is one of those that are constantly under pressure due to the changing consumer behavior and trends associated with the industry. Even though, the circus industry has trembled for quite a long time, Cirque was able to enhance its profits along with its revenues in 20 years; a profit that older world leading circus took a century to attain. In order to attain such impressive and remarkable revenues, Cirque focused on creating an uncontested market space and aimed towards the audience that were noncustomers of the industry. This was the major advantage of the Cirque which allowed the circus to attract adults and corporate clients that were willing to pay more for unprecedented entertainment experience. With the creation of such uncontested market, Cirque was able to reduce its competition with the help of blue ocean strategy (Kim, & Mauborgne, 2004).
As the companies are moving towards competitive environment, therefore the blue ocean strategy has been consistently adopted by the organizations to fuel their growth and to differentiate them. Similarly, the organizations that once focused on red oceans to enhance their competitive position are now facing difficulties in managing their products and services offered to the customers as more and more companies are entering the market offering products that are alike. Such overcrowded market has witnessed the peak and soon will witness the decline as people are making their purchase decisions based on price and promotion. In addition, maintaining a competitive position in such a market based on differentiation has become quite difficult due to the change in market and economy. Even though, the companies are having difficult times in red oceans (i.e. the current market or industry they operate in), it has been identified that 86% of the companies highly focused on line extensions while the rest of the companies i.e. 14 percent are aiming to create new markets. Kim and Mauborgne (2004) studied on the new businesses that are entering the market and they indicated that the companies that relied on line extension were able to enhance their total revenue and profit margin i.e. 62 percent and 39 percent respectively. On the other hand, the 14 percent of the companies that focused on creating new market or industries were significantly able to enhance their revenues and profit margins. With the creation of such markets, the companies were delivered with 38 percent of the total revenues and interestingly 61 percent of profits (Kim and Mauborgne, 2004).
The imbalance between red oceans and blue oceans is quite clear in the practical world. It has been continuously observed such organizations that are operating under red oceans are constantly facing difficulties in managing their market shares and position (Hollensen, 2010). On the other hand, organizations in blue oceans face little or no competition and due to such factor the businesses are provided with an opportunity to enhance their growth in the market as the strategy is quite simple i.e. creating new lands rather than dividing existing lands. The greatest examples of blue ocean strategy at work could be observed in automobiles, computers and movie theaters (Kim and Mauborgne, 2007). However recently, there have been further innovations and line extensions that have allowed organizations to differentiate them in the market.
Use of advanced technology is one of the essential factors that allow the organization to enhance its growth in the red oceans but in blue oceans such factors has no such dominant role. It could be said that technology is often used in the creation of blue oceans but blue oceans are not defined in terms of technology. Blue oceans are usually created by incumbents rather than new entrants in the market (Neilson, Martin, & Powers, 2008). Although blue oceans exist within the red oceans, blue oceans are created by incumbents based on their core businesses. General Motors, Japanese automakers and Chrysler are the most popular and well established automobile organizations that created their own blue oceans based on their core business. In the computer industry CTR, IBM and Compaq are the greatest examples of success due to their blue oceans. Similarly, in the Smartphone industry Apple and Samsung are the top two companies.
Blue Ocean is such a strategy that allows an organization to enter such a market where there is no prior competition. Such unique characteristic of blue ocean market allows the organization to build its brand equity in such a way that it would last for a decade. Compaq is one such company that might be regarded as unsuccessful due to its acquisition by HP in 2001 but the market that Compaq once created led to the creation of multibillion-dollar market in PC servers. The market created by Compaq was the main cause of the powerful comeback in 1990’s. There are many examples of organizations that once took a bold step for the creation of Blue Ocean and the companies are still benefiting from their move.
Although companies are more focused towards the creation of red oceans regardless of the benefits that could be achieved with blue oceans, however blue ocean strategy has played far more important role for organizations to enhance their growth (Keegan, 2001). Competition in Red Ocean is inevitable and that is the core reason due to which organizations tend to focus higher on red oceans. In such strategy, the organization is provided with an opportunity to exploit existing demand to enhance the market share and profit ratio. In addition, when the organizations are competing in the existing market, it lowers the chances of success for the organization. When the competition is intense in the market as in Red Ocean, then the organization aligns its systems to either focus on differentiation or cost according to the situation (Kotler, Keller, Brady, Goodman, & Hansen, 2009).. This indicates that the companies are bound to follow the traditional rules whereas; in Blue Ocean the organization creates an uncontested market space which allows the organization to create and capture new demand. With such a strategy at work, the organization focuses highly on the creation of demand regardless of the competition in the market and can set its activities accordingly to pursue differentiation and low cost at the same time. This indicates that the characteristics of blue ocean strategy are far superior to the red ocean strategy and because of this reason the organizations are focusing on the creation of uncontested market that are provided with higher opportunities of growth along with higher profit margins.
Cirque is one of the best examples of Blue Ocean. With such a strategy at work, the circus was able to eliminate all the barriers that were in between the growth and the business. Even though, it was tough for Cirque to be successful due to the changes in consumer behavior, however Cirque was able to create its market of its own. Unlike others, Cirque offered its customers with both the theater and circus entertainment. This strategy helped Cirque in eliminating all the unnecessary and expensive elements of the circus and was eventually able to reduce the cost structure to great extent. In addition, Cirque was able to attain low cost and differentiation simultaneously. With low cost, the circus was able to enhance the value for buyers and was able to enhance its profit ratio that none other circus was capable of. The success of Cirque lies within red oceans of theater and circus which enabled the circus to reap all the benefits without any constraints.
In the end, it can be concluded that blue ocean strategy not only provides an organization with an opportunity to fuel its growth but also provides the business with a market with no competition. Although many organizations are still focusing on red ocean strategy to enhance their market share and their profitability but the rising competition in the market would be the biggest hurdle for such organizations. As there are no threats of competitors in blue oceans and barriers to imitation are quite high, the organizations that are highly focused on blue ocean strategies have superiority over others in the market. By creating Blue Ocean, an organization can attract customers in larger volume and are able to generate sales in higher quantity as compared to others. Wal-Mart is one of the current practical examples of blue ocean strategy at work. Wal-Mart’s business model is quite difficult to be imitated as the company enjoys high economies of scale in purchasing which is quite impossible to be imitated at least for 10 years.
References
Hollensen, S. (2010). Marketing management: a relationship approach. London, Pearson Education.
Keegan, W. J. (2001). Global marketing management: a European perspective. Boston, Pearson education.
Kim, C., and Mauborgne, R. (2004). Blue Ocean Strategy. Harvard Business review, pp. 1-10.
Kim, W. C., & Mauborgne, R. (2007). Blue ocean strategy. Leadership Excellence, 9, 20-21.
Kotler, P., Keller, K., Brady, M., Goodman, M., & Hansen, T. (2009). Marketing management: first European edition. London, Pearson.
Neilson, G. L., Martin, K. L., & Powers, E. (2008). The secrets to successful strategy execution. Harvard business review, vol. 86, no. 6, pp. 60.
