Monday, September 8, 2008

Blue Ocean Strategy

The business universe consists two distinct kinds of space, which are blue and red oceans. Red oceans represent all the industry in existence today. The market space was known, industry boundaries are defined and accepted, and the competitive rules of the game are well understood. On the contrary, blue ocean strategy denote all the industries not in existence today. Blue ocean strategy is about doing business where there is no competitor, focus on creating new land, not dividing up existing land. In designing blue ocean strategy, these concept must be considered:

1. Blue oceans are not about technology innovation. It is the product of strategy and managerial action.

2. Incumbents often create blue oceans and usually within their core business. Most blue oceans are created from within, not beyond, red oceans of existing industries.

3. Company and industry are the wrong units of analysis. The most appropriate unit of analysis for explaining the creation of blue oceans is the strategic move.

4. Creating blue oceans can build brand equity.

The creators of blue oceans never use he competition as a benchmark. They make it irrelevant by creating a leap in value for both buyers and the company itself. Blue oceans rejects the fundamental tenet of conventional strategy: that a trade-off exists between value and cost. When companies create blue ocean, they can pursue differentiation and low cost simultaneously. Blue ocean strategy also creates considerable economics and cognitive barriers to imitation.

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