Apr 26 2011
Blue Ocean Strategy… The future trend of Business strategy ?
Article by Zigfred Diaz
I was in Star Bucks Club Ultima this day to talk with a friend regarding a new affair that he is plotting to start.
One of the things that he mentioned was this unique affair strategy that’s quite different from what we traditionally gather in affair school. According to him, this strategy sorts of deviates from habitual affair concepts that we hear and read from the usual management gurus. This strategy is called “Blue Ocean Strategy”
I was intrigued by the thought so I did a small bit of research on the subject. Blue Ocean Strategy is a corporate strategy that aims to tap unclaimed markets making competition irrelevant. The strategy is embodied in the book entitled “Blue Ocean Strategy” by Professors W. Chan Kim and Renee Mauborgne and Published by Harvard Affair School Press. The authors claim that the Blue Ocean Strategy is a result of several years of examine of strategic moves by over 30 industries in a span of 100 years.
In the book, “Blue Ocean” refers to an unused market, a market wherein there is only small or no competition at all enabling anyone to claim the market for his own since it is not yet too crowded. In contrast, “Red Ocean” refers to a market everywhere competition is very high. The market is considered as very crowded already since nearly everybody is producing the same type of service and the same kind of goods.
The Blue Ocean strategy is simply to innovate something; something that makes people gives a higher value for a certain product or service. Since doing this would require bonus cost, the cost that is incurred by the value added is reduced by eliminating product or service features that the market does not really care about.
In order that this can be understood well a “local” application must be cited. According to my friend a classic example of how the Blue Ocean Strategy was used here in the Philippines is the strategic moves of the Gokongwei assemble. As we all know, the Gokongwei assemble owns Mobile phone company, Sun Cellular and airline Cebu Pacific amongst additional companies.
Since the market for mobile phones has already been saturated by both Smart and Sphere, what Sun Cellular did is to make a “new market” by adding value to harvest already found in existing markets. As a result of this “added” value, (By making sun to sun calls free) a new unused market was opened. It could be said that Sun Cellular is not competing directly with Sphere and Smart but rather they have raised awareness amongst the people to buy into this “new market.” As a result, most people now have two cellular phones or two sim cards in a dual sim phone. In this way Sun Cellular is not “out-the theater” Smart and Sphere but rather they have made a new market, making competition irrelevant.
In the airline industry, Cebu Pacific has managed to apply the Blue Ocean Strategy by adding “value” to what people really want, which is to “glide.” People don’t care about a newspaper, a hot meal or a fancily dressed flight stewardess. What people care about is that they can “glide.” In order to do this airline fares must go down since this is what people care about. This in a sense allowed Cebu Pacific to tap into the “unused” market. The existing market is referred to as “customers who can only afford to glide.” The unused market is “every can glide.” This is embodied in Cebu Pacfic’s advertisement “Now every JUAN can glide” (A play on the words “every juan” = “everyone”, with “J” being pronounced as “H”, Juan is the “universal” first name of Filipinos just like John is for the Americans)Cebu Pacific has managed to slash down fares by reducing cost on service features that most people do not really care about such as hot meals etc.
Being involved with the International Marketing Assemble (IMG), I can now clearly see that they have employed the Blue Ocean Strategy in the way they do affair. I do not know if they have being doing this consciously or unconsciously. Instead of selling insurance harvest directly, IMG teaches it’s clients and brokers the concepts of financial plotting and management. (albeit not in a very organized manner) Product is not given primary importance. The financial broker shows his client his need for financial plotting. The financial broker who is well versed in financial plotting concepts then introduces harvest that suits the client needs. The unused market of financial plotting needs by the people is claimed by IMG and the added cost for this value service is compensated by reducing cost with regards to schooling agents and marketing efforts since IMG works on a model that allows insurance and financial services company to “outsource” their marketing and schooling. Additional insurance companies have already followed this path. The trend now is that insurance agents are now becoming financial planners.
My friend’s proposed affair has a similar concept but it is something more than financial plotting. He wants to introduce a value added service to clients that will enable him to add value to existing service in order to capture “unused markets” But I could not chat about the details of the plot yet, but I am sure that employing the Blue Ocean Strategy would enable him to succeed in the new affair that he is thinking. I don’t know in the proper time I could help him promote his affair by writing an article on it, probably when the final details of the plot have been ironed out. But you force want to check out his website at http://www.premierebusinessinc.com
In Habitual Affair strategy we talk about “crushing the competition” whereas in Blue Ocean Strategy we talk about “Making new markets with small or no competition.” Instead of “Strategic Plotting” Blue Ocean Strategist alternative to “Strategic thinking.” Instead of “cutting prices” to capture a market, Blue Ocean Strategy is to add “value” to harvest and services to claim an unused market.
I could personally say the Blue Ocean Strategy is a unique strategy. Critiques may say that the Strategy has already existed a long time ago and that principles that are said to be unique to the strategy can be found in additional habitual affair strategies as well. For me, the critics may just be jealous that they were not the first ones to embody the “strategy” in compact form. The critic’s contention are not valid at all since our way of learning something or learning something is to build upon the knowledge that has been universally accepted by the majority. A new theory is always built upon something that has already been long time accepted as a scientific principle or even theory. (Just like the theory of relativity rest upon the foundations of the principles of thermodynamics, electricity, gravity etc.) Whatever the Critics have to say, the strategy certainly is here to stay and is sure to have an effect on the way prospect entrepreneurs, managers and leaders will reckon and do affair in the years to come.
About the Author
Zigfred Diaz is Vice president for operations for a assemble of family owned corporations. He is also a Financial & Real estate broker, lawyer, law professor & writer. He regularly blogs on diverse topics including affair and entrepreneurship. Visit his blog today.
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