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Red Sea and Blue Ocean Approach

Introduction

"Blue Ocean Strategy" by W. Chan Kim and Renee Mauborgne is a technique that challenges companies to distance itself from fierce competition by building uncontested market space which makes existing competition irrelevant. One of the explanations why the authors have used the shades red and blue is to describe the marketplace. Red sea is the marketplace space where industry boundaries are defined and known. The red ocean contains an enormous conflict between companies where they are really constantly seeking to outperform one another to achieve a greater show or demand. Kim and Mauborgne clarifies in an interview that when market spots become congested with competition, companies try out perform each other and gains and growth is greatly reduced credited to cutthroat style competition which transforms the red ocean bloody.

In compare, blue oceans is the anonymous market space where it is unaffected by competition and demand is established alternatively than fought for. In blue oceans, competition is not relevant because the rules or obstacles to the marketplace space is not placed yet and it is often holding out to be arranged. The Writers uses the blue ocean analogy to describe the uncontested market space with no opponents and the opportunity to explore. The analogy of an blue sea can be associated with success and development being "vast", "deep" and "powerful".

Traditional methods to competitive strategies are highly inspired by Michael E. Porter. Kim and Mauborgne present to us in their publication a fresh method of make your competition irrelevant. In this paper I'll discuss the variations between classic red ocean strategies that are influenced by Porter and Kim and Mauborgne's blue sea strategy. Furthermore, the newspaper will discuss the dissimilarities between your SWOT examination and the four actions framework.

Competing in existing market space versus Creating new market space

The red ocean represents the prevailing market space where there's always a constant power of rivalry to deal with for market show. To successfully operate in a red sea, it is important for companies to perform competitor analysis so they can stay modified on what their opponents are doing and what they are planning to do. Red ocean strategies represent approaches to safeguarding and stealing market talk about from competitors. According to D'Aveni, market share can be taken by companies satisfying their competitor's customers better. To contend in the existing market space, companies need to mould their products based on the customer's preference through refining existing products or creating new to the earth products. However, the bloody cutthroat competition of the red sea most often causes companies to build up similar or replications of products or services of the competition that did well.

In the red sea where competition is based on price and quality, being truly a first mover is an important benefits because by being flexible a business can change easily to exterior changes such as customer requirements and trends. By being an initial mover, the business gets benefits such as low costs and economies of level. I think this is also the key reason why the red ocean is so bloody because similar products and services have been enhanced and replicated over and over again with low cost, it has induced companies to hesitate to look into new options and therefore in a frequent battle to battle for market show by cutting income lower and lower. For the firms that succeed in increasing a competitive advantages by being an initial mover, it's important to allow them to exploit the chance of that gain approximately they can because very soon the competition will catch on to it. The tradition theory to contending in existing market space is targeted on building your small business through analysing challengers.

In comparison, Blue Ocean identifies all the market sectors that aren't in existent. In the opening chapter of the Blue Ocean Strategy booklet, Kim and Mauborgne suggest that the only way to beat the competition is to avoid trying to overcome the competition. This is a complete compare to conventional red sea strategies because instead of analysing opponents, and try out perform them, Blue Sea Strategy encourage companies to differentiate or break from the prevailing market space, hence making competition irrelevant. The authors suggest that there are many ways to build blue oceans. In few situations, companies can build completely new market sectors. A good example of this is exactly what eBay do with online auctioning. Blue ocean strategy says a business can create a blue sea market space by innovating a new product or service mainly focusing on new to the world services. However I really believe developing new to the globe services come with high risk and bills but if done correctly can be very profitable.

Kim and Mauborgne claim that most companies tend to adapt to new trends rather than wanting to shape new tendencies. What the writers signify by this is the fact companies make activities directed at maintaining trends and do not look across time or go through the big picture. They claim that to make a untapped market space, companies need to find fads that are observable today and look at the big picture and see what happens to the worthiness it has in the foreseeable future. A prime exemplory case of what sort of company successfully performed this plan would be Apple. Apple researched and watched the growing pattern of music posting online over the last 10 years through software used illegally such as LimeWire and Kazaa. The style of music showing became clear to Apple and they took the chance and created the web iTunes music store in 2003 which distributed music legitimately.

Red Ocean and Blue Sea approach to industry boundaries

Red ocean marketplaces are large and the speed of product creativity is low. Therefore the market is usually seriously filled by competition and there are always a set of guidelines that is known. Within the hostile red ocean environment, companies make an effort to outperform the other person in order to regulate market show and demand. As the market space gets packed, growth and revenue are greatly reduced and a cost war is begun. Competition based strategies have been the key fundamentals of strategic thinking within the last decades and as a result, most companies benchmark themselves towards competition.

In comparison, blue sea strategy emphasises on finding and exploiting market space. The writers claim that companies must understand that in order to be successful long-term, they have to stop rivalling and benchmarking the competition. It is important for companies to view your competition from a broad perspective and consider market sectors that produce alternatives with the same functions and varieties to satisfy the finish customer. Relating to Kim and Mauborgne, most companies concentrate on bettering the competitive position in a segment and concentrate on outperforming competition in the same segment. They dispute that is it imperative to understand the actions of opponents in other segments not only the one your company is within. To be able to create a blue ocean environment, companies need to understand the factors that effect the customer's decisions to improve sections such as price and performance.

Blue sea strategy also focuses on looking across string of customers. By changing the industry traditions of which buyer group to focus on and looking over the chain of potential buyers, companies can get an understanding how to concentrate on overlooked sets of buyers. Kim and Mauborgne discuss the value of considering the whole string of buyers including purchasers, actual users and influencers. By focusing on many of these groups the company can break away form your competition and make a blue ocean environment and the competition would become irrelevant because the industry limitations are longing to be created. An example of an Australian organisation that has used this strategy is wine maker Casella Wines. Casella Wines broke free from the boundaries of the home competition and relocated towards the US market through employing blue ocean strategy and focusing on a segment that was not tainted yet which was the non-wine drinking alcohol population.

Differentiation and Cost cutting

The traditional red ocean view focuses on the importance of fabricating just one single competitive advantage. Porter (1980) is rolling out recognised theories that describe the three types of competitive strategies as cost leadership, differentiation and concentrate. Porter emphasises the threat of an organization being in the center of the strategies and the importance of plainly selecting one strategy. If an company tries to use with multiple strategies, it'll supposably lose its competitive advantage and concentration.

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