Blue Ocean Strategy Paper Julie Rose Howdyshell MKT 421 Week 4 Paul Sage Blue Ocean Strategy The blue ocean strategy in marketing is a unique approach to building a customer base. Rather than try to compete in a crowded marketplace with existing companies, a blue ocean strategy looks to build an entirely new market segment that has not other existing firms. With the rapid growth of technology and globalization, the importance of a blue ocean strategy has grown in recent years. The following essay will analyze the blue ocean strategy and offer suggestions on how it can employ in the modern business environment. What is a Blue Ocean Strategy in Marketing?
Description of blue ocean strategy and its importance Blue Ocean Strategy is a term that describes how companies customarily work in "red ocean" conditions, where businesses viciously fight against each other for a share of the marketplace. Instead, according to the blue ocean strategy, organizations should find a way to work in a marketplace that is free of competitors (Arline 2015). Blue Ocean Strategy is where leading companies will prosper not by fighting competitors, but by creating "blue oceans" of recognized market space ready for growth (Arline 2015). Blue Ocean Strategy is important because it is easier for many companies to produce more of their product because of technology advances. It is also important to companies to enter the blue ocean to find new opportunities.
In my opinion, by creating Blue Ocean Strategy, you can leave the competitive and bloody Red Ocean and achieve long-term success in a new market space. The most important aspect of the Blue Ocean Strategy is the fact that it discards the conventional notion that companies can either create greater value for consumers at a higher price or produce reasonable value at a lower cost. Instead, blue ocean strategists believe that by re-evaluating and restructuring an industry, it is possible to achieve both a significant reduction in the cost of production and achieve a leap in value. Therefore a blue ocean is created when companies’ actions favorably affect its cost structure and its value proposition to buyers. When it comes to examine companies which have practiced Blue Ocean Strategy successfully, Starbucks is a good example.
The “Five Forces” are external forces that a corporation needs to consider for its business strategy to compete with other in the real world. The “Five Forces” that shape the competition according to Mr. Porter are: 1) Threat of New Entrants, 2) Bargaining Power of Suppliers, 3) Bargaining Power of Buyers, 4) Threat of Substitute Products or Services, and 5) Rivalry Among Existing Competitors. In 2004, Robert Kaplan and David Norton published “Strategy Maps: Converting Intangible Assets into Tangible Outcomes”. Their strategy map provides a systematic way to analyze if the intangible assets are aligned with the critical internal processes. Intangible assets according to Kaplan et al.
Apex Chemical Company is facing a difficult decision as to which path to invest in, compound A-115 or compound B-227. With limited resources and two divergent market paths it will be critical to invest in the correct course. After reading the case brief and applying the 5C Framework for Innovation, I believe that Apex should pursue the plastic oxidizer, Compound B-227. Apex’s corporate growth strategy determines the scheme and mechanisms that define how the organization will achieve sustainable enterprise growth by providing the framework for how the company will make money. This overreaching growth strategy will help facilitate the proper course of action.
• A differentiator gains a competitive advantage because it has the ability to satisfy customers’ needs in a way that its competitors cannot, which allows it to charge a premium price for its product. • Premium prices → increased revenue → superior profitability • A differentiator invests its resources to gain a competitive advantage from superior innovation, excellent quality, and responsiveness to customer needs • A product’s appeal to customers’ psychological desires is a source of differentiation. ▫ Example? 13 Differentiation • Generally, a differentiator chooses to divide its market into many segments and offer different products in each segment • A differentiated company concentrates on developing distinctive competencies in the functions that provide competitive advantage ▫ These are still expensive! • A differentiator must control its cost structure to ensure the price of its products does not exceed the price customers are willing to pay for them • When differentiation stems from the design or physical features of the product, differentiators are at great risk of being imitated ▫ Example?
What's a red ocean? -the rivalries we understand in known industries -You accept key constraints that define your industry → boundaries are defined and accepted, competitive rules are understood What is a blue ocean? -Doing business where there is no competitor-- finding your own space; demand is created rather than fought over. -You don't accept that it is difficult to create new market space. How is a blue ocean created?
BLUE OCEAN STRATEGY Blue Ocean strategy is a case study which in detail explains how industries in this world differ from each other. In this case study I came across a classification of industries. The industries were categorised in to two groups- blue oceans and red oceans. Blue Ocean is a category of industries that have emerged in untapped market space, which has large probability for high profitability growth. When an industry enters a new zone or field where there is no competition and when that industry becomes a trendsetter, it will come under Blue Ocean.
Given today’s realities, certainly competition is important for a firm’s success but “doing the same thing better is no longer good enough for wooing, winning, and retaining customers” (Vandermerwe, 1995, p.79). The blue ocean strategy “involves not competing, but making the competition irrelevant by creating a new market space where there are no competitors” (Kim and Mauborgne, 2005, p.
May 20-21. We might pay your flight! www.nyenrode.nl/imba Many firms strive for a competitive advantage, but few truly understand what it is or how to achieve and keep it. A competitive advantage can be gained by offering the consumer a greater value than the competitors, such as by offering lower prices or providing quality services or other benefits that justify a higher price. The strongest competitive advantage is a strategy that that cannot be imitated by other companies.