Wednesday, November 25, 2015

Blue Oceans & Red Oceans Landscape

Blue Ocean strategy focuses on creating opportunities and pursuing targeted niche market spaces which offer creative high value propositions in a less aggressive landscape [1]. This strategy can encompass one or more of three elements; first, the ability to create a new product or service, second, to create demand for a product or service for non-customers who are ready to jump ship from other segments, and third, to search beyond industry boundaries for newer untapped opportunities. The resulting product breaks existing industry patterns and creates an inventive space which acquires customers from multiple competitor profiles [1]. Although a popular, much debated strategy, it contains its own set of risks. For certain industries, it is impossible to disregard relevant competition and it isn’t particularly easy to reinvent the wheel. I believe that there are several different reasons to consider and be cautious of, before driving a firm towards a Blue Ocean Strategy.

Let’s consider the example of Tata Nano car, which was introduced in the burgeoning middle class in India in 2008. It was introduced into the market as a ‘low cost’ car that was affordable and an attractive selection over two wheelers such as motorcycles. It was priced relatively lower but due to its numerous cost reduction features, it failed to make it through the most basic UN crash safety test requirements. We can conclude that this product was very different from it’s competitor space in the automobile industry and strived to serve a profitable customer segment, yet it couldn’t make it big amongst the growing middle class in India. Although a Blue Ocean strategy implementation and an extremely lucrative opportunity considering the prospects of the vehicle, yet the car ended up receiving a very moderate reception in sales.

Another example to consider, would be that of The Body Shop, which was initially started as a line of products that drove the idea of ‘functionality’ at relatively lower pricing [2]. The value proposition was to be able to offer a good product with a focus on a healthy lifestyle. Against luxury brands such as Victoria Secret and Bath & Body Works, the company excelled in the market, that they had successfully captured. Yet it took only a decade, until they found themselves in the red ocean defending their product and pushing to innovate to achieve sustainability. Hence, it is important to understand that the elements emphasized in the Blue Ocean Strategy change over time as the market landscape evolves. Moreover, this strategy may not be ideal or successful for every firm in the industry.

The Blue Ocean Strategy article, has successfully highlighted numerous winning stories but has failed to implement a more deductible approach in their analysis to also consider Blue Ocean failures. For instance, BOS cannot be entirely implemented in the Energy & Power industry due to it’s monopolized landscape or the Cosmetics market which is highly saturated with rivals with a plethora of product offerings. These are just a few examples from an exhaustive list of industries that are nearly impossible to penetrate and innovate in [3].
Therefore, although certain aspects maybe particularly compelling about the Blue Ocean strategy, it’s implementation is difficult and very relative to the core competencies of the firm and industry in question.



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