BLUE OCEAN STRATEGY

Rather than competing within the confines the existing industry or trying to steal customers from rivals in the HBR of October 2004 W.Chan Kim and Renee Mauborgne suggest Blue Ocean Strategy: Developing uncontested market space that makes the competition irrelevant.

According to Kim and Mauborgne, competing in overcrowded industries is no way to sustain high performance. The Opportunity is to create blue oceans of uncontested market space. Ofcourse competition matters. But by focusing on competition and competitive advantage, according to Kim and Mauborgne, schloars, companies and consultant have ignored two very important and far more lucrative – aspects of strategy:

One is to find and develop blue oceans, and the other is to exploit and protect blue oceans. These 

challenges are very different from those to which strategists have devoted most of their attention.

In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid.

There are two ways to create blue oceans:

One is to launch completely new industries, as eBay did with online auctions. It is more common for a blue ocean to be created from within and a red ocean when a company expands the boundaries of an existing industry. Certainly Kim and Mauborge deserve credits for having made the point of the over focus on competitive advantage and also for their beautiful metaphor of the two types of oceans. Hopefully, the authors will provide more specific tools to find, create, develop, exploit and protect blue oceans in their forthcoming book.

Red Ocean Strategy	Blue Ocean Strategy
Compete in existing market space.	Create uncontested market space.
Beat the competition	Makes competition irrelevant
Exploit existing demand	Create and capture new demand
Make the value/cost trade-off	Break the value/cost trade-off
Align the whole system of a company’s activities with its strategic choice of differentiation or low cost.	Align the whole system of a company’s activities in pursuit of differentiation and low cost