Blue Ocean Strategy - Part I

Is Blue Ocean Strategy Sustainable?

1.Introduction
Blue Ocean Strategy (BOS) according to Kim and Mauborgne (2005) provides a systematic approach to making the competition in business irrelevant. BOS is the result of a decade long in-depth study of more than hundred strategic moves on more than 30 industries over 100 years (1880-2000).

The main driving forces and factors that lead to the creation of BOS are party due to the technological advances and globalization of market.The main aim of BOS is not to outperform the competition in the existing industry, but to create new market space or untapped market space, demand creation, and to create the opportunity for highly profitable growth.

The cornerstone of BOS is a concept called value innovation. That is to align its cost structure and its value proposition to its customers. The sustainability of BOS depend not only the barriers to imitation, but also the continuous value innovation.

2.Identify the most important and influential theory/research of BOS
The important of BOS is it provides a true alternative and challenge to the traditional normal business strategic thinking.

2.1.Creating New Market Space
The authors have studies how innovative companies break free from the competitive pack by staking out fundamentally new market space (Kim and Mauborgne, 1999). It was a set of ideals encompassing tools and methodologies to help companies gain a competitive edge by creating uncontested market space or blue oceans. It is about building a business around a market demand that other people have not identified and if a company is able to do well, it will not have serious competition.

2.2.Value Innovation
The cornerstone of BOS is a concept called value innovation. that is to align its cost structure and its value proposition to its customers. Kim and Mauborgne (1999) describe how companies can systematically pursue value innovation by looking across the conventionally defined boundaries of competition. In the subsequent book, the authors further describe how value innovation is created, where it affect both its cost structure and its value proposition to buyers (Kim and Mauborgne, 2005)

2.3.Analytical Frameworks and Tools
The authors have developed practical methodologies with frameworks and tools include strategy canvas, value curve, four actions framework, six paths, and buyer experience cycle and buyer utility map.

2.4.Summary
In summary,BOS should reconstruct market boundaries by construct a strategy canvas that clearly states its future BOS; focus on the big picture; reach beyound existing demand; get the strategic sequence right; and overcome organizational hurdles and build exercution into strategy.

3. The nature and scope of the controversy
3.1. The nature of Blue Ocean and Red Ocean
The traditional theories of strategy emerge as a way to shape market forces and affect the competitive environment and this competitive environment influences the dynamics of strategy. The early notion of strategy theories center around its competitive environment. In 1960s, the SWOT analysis is an example. Boston matrix is another, which shows the rate of market growth and the relative market share in the competitive market environment. Similarly Portor Five Forces also involve the rivalry amongst existing firms. The competitive benchmarking try to make comparison with direct competitors. Porter's generic competitive model try to analyze the competitive position of rivals and take the appropriate competitive strategy for the firm.

The early notion of competitive strategy has been referred to as "Red Ocean" strategy. The "Red Ocean", refers to a saturated market where fierce competition exists and is already crowed with peoples and companies providing the same types of services or products. the companies fight for competitive advantage and survival in the same limited terrain.

On the other hand, "Blue Ocean" refers to untapped and uncontested markets that provide little or no competition for anyone diving in, as the markets are not crowded.

3.2. Existing Market Space Vs Uncontested Market Space.
The traditional strategies place boundaries on market space, whereby companies fight for competitive advantage and survival in the same terrain. It is about how to outpace rivals in existing market space, it is a market-competing strategy.

On the other hand, BOS challenge the normal stategic thinking, by reconstructing market boundaries and creating uncontested market space that makes the competition irrelevant. It is about how to get out of established market boundaries to leave the competion behind, it is a market-creating strategy. Apple computer is an example of BOS, which has successfully moved into the cellular phone industry by adopting a variety technology combining with multimedia (iTunes and Quick Time Player). Ebay an online auction and web market place is another example of BOS. Similarly, Yahoo! has emerged as one of the world most popular portal of the new economy. Also, the ingenius Google search engine, a meta search engine, have capture more than half the world search result.

In traditional Red Ocean Strategy, advantage comes from exploiting existing resources or stable market positions. On the other hand, BOS exploits uncontested market space as advantage.

3.3. Exploiting Existing Demand Vs. Creating and Capture New Damand
BOS challenges management to reach beyond existing demand that is to explore how to aggregate the largest possible mass of buyers for the new ideal. That is instead of concentrating on existing customers, they need to look to noncustomers through developing a new value proposition based on cost effectiveness and value differentiation. This is a key component of achieving value innovation (Kim and Mauborgne, 2005a, p111).

3.4. The Paradigms- Radical Humanist Vs. Radical Structuralist.
BOS develops a sociology of radical change from a subjective standpoint. It is a subjective approach to social science. It is based on the assumption of nominalism, antipositivism, voluntarism and ideographic. It is a critique of the status quo. The research method is based on qualitative rather than quantitative.