| Kippreport.com

Oceans apart

July 19, 2010 3:16 by Prasanna Perera

In today’s overcrowded industries and markets, competing head on results in nothing but a bloody “Red Ocean” of rivals fighting over shrinking revenue and profits. But by creating “Blue Oceans” of uncontested market space, organizations can make their rivals irrelevant and thereby achieve hyper-growth.

What are Blue Oceans?

Blue Oceans are defined by untapped market space. They are created well beyond existing industry boundaries, as well as within existing industry boundaries.

The Blue Ocean strategy is a paradigm shift from the conventional, Red Ocean thinking. The strategy demands that you create uncontested market space, making the competition irrelevant, creating and capturing new demand, breaking the value/cost trade off, and pursuing both differentiation and low cost. (In contrast, a Red Ocean strategy would involve competition in an existing market place, beating the competition, exploiting existing demand, making a value/cost trade off, and choosing to pursue either low cost or differentiation.)

Why Blue Oceans?

Technological advances have created an unprecedented array of products and services, resulting in supply exceeding demand in an increasing number of industries ­– for example, airlines, fast food, FMCG and industrial products, etc.

Globalization is also resulting in monopolies and niche markets disappearing, due to trade barriers being dismantled.

Many free trade zones have been established globally. The need for Blue Oceans is caused by the commoditization of products and services, increasing price wars and shrinking profit margins.

Many organizations believe that differentiation will help them gain a competitive edge.

However, when industries become overcrowded, differentiating brands too becomes harder.

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