Blue Ocean Strategy

Topics: Economics, Firm, Blue Ocean Strategy Pages: 2 (557 words) Published: August 22, 2013
Blue Ocean Strategy

While traditional approaches to corporate strategy, such as those presented by Porter, Oster, and Duggan emphasize victory through direct competition in existing markets, blue ocean strategy stresses the avoidance of conflict as key to long term commercial prosperity. By creating new demand rather than battling for existing market space, a firm can position itself for rapid growth, profitability, and dominant brand equity. While certain organizational traits ease the implementation of blue ocean strategy, exceptional resources, industry characteristics, or new technologies are not required. Rather, “blue ocean firms” differ primarily through their rejection of traditional performance metrics, methods of innovation, market boundaries, and value / cost tradeoffs. Examples of such firms exist in financial services, retail, and sports entertainment.

The first step in creating a blue ocean strategy is to redefine market boundaries, allowing a break from the competition. Rather than defining an industry by specific service or product offerings, firms should consider what characteristics of a given service or product are core to its value proposition. Differentiating between core value drivers across industries and strategic groups puts a strategist in a mindset free from traditional market definitions. Once core drivers have been identified, a firm can consider creating an offering that reduces or eliminates non-core features, and raises or creates factors that are of significant value to customers. Similarly, this approach emphasizes the pursuit of product differentiation and low cost production, which is essential to creating blue oceans. Setting one’s firm apart from established competitors will also force a firm to become internally driven, removing comparative benchmarking, which leads to red oceans. Ultimately, this will lead to “leaps in value” for both the firm and its customers.

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