Wednesday, April 13, 2016

The Two Oceans

The Two Oceans
There are two kinds of oceans in this world according to W. Chan Kim and Renee Mauborgne, writers of the article and book ‘Blue Ocean Strategy’. Their article talks in brief about both of these, namely the Blue Ocean and the Red Ocean.

The Blue Ocean is that in which a business can create its own market space; one where instead of competing with others, it sets pace for the industry and generates massive profits from the lucrative space it self-created. Cirque de Soleil and Southwest Airlines are companies reviewed by Kim and Mauborgne within the article. Both of these were successful in reinventing the service and experiences provided within their respective industries and hence capture majority of the markets. On the other side is the Red ocean – the known market space we have today. It consists of all the industries in existence; where companies continuously compete with each other to increase their own market shares. As more and more companies exist within this space, the profits start to go down, increasing competition extensively and hence causing market turmoil. Prime examples of red ocean companies are the numerous domestic airlines in the US, Europe and India; Delta, United, Indigo and SpiceJet to name a few.

Netflix is an interesting venture of the current age which has taken the internet by storm. A company which was initially founded in 1997 by Marc Randolph and Reed Hastings, it operated a pay-per-rent movie rental website shipping movies to consumers. Eventually, it upgraded to a monthly subscription model in 1999 where consumers could order a bunch of movies per month for the same monthly fee. Finally in 2007, Netflix broke the internet with news about its decision to stream movies and videos over the internet. By using this Blue Ocean Strategy, it had succeeded in becoming the largest movie streaming service pushing away competing cable and TV service companies. Their recent decision to enter the global market country-by-country is another step in propelling the blue ocean strategy trend.

Concluding, the authors of this article clearly convey a strong message that businesses need to direct their efforts less towards their current customer base and more on the non-current and potential customer base so as to be a leader in the market directing themselves towards to be a Blue Ocean company.

References:

Blue Ocean Strategy by W. Chan Kim and Renee Mauborgne (Oct 2004 Issue)

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