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Blue ocean strategy
Published on December 31, 2015 7 min
A selection of talks on Strategy
Hello. I am Dr. Ashok Kurtkoti. I am going to speak on Blue Ocean Strategy.
Coming to the current market situation, what has happened is the world has become a global village after liberalization in 1990. All over the world you find that there's a lot of competition. Competition is severe due to globalization, and it's no longer a monopoly situation. Companies are finding it hard to compete, and that's the reason for me to take this particular topic.
Now I'm coming to the Red Ocean. We have existing market space, industrial boundaries are well-defined, then we have cutthroat competition, and the growth and profits are restricted. It is exactly what, as I told you, is the current market situation. Today, we're finding it hard to compete with each other and that it's really possible for us to find out why Blue Ocean is created.
Now when you talk about Blue Ocean, it creates a new market space. Companies expand and grow across the boundaries. And competition is irrelevant in this case. We want to make competition irrelevant and make significant opportunities for growth.
And this is a term coined by two Harvard professors, Kim and Mauborgne, both from Harvard. They've studied about 150 positions from 1880 to 2000, in more than 30 industries. First of all, it was called value innovation, then it was turned into Blue Ocean Strategy. They first published research results in a Harvard Business Review article titled, "Value Innovation: The Strategic Logic of High Growth."
Let me explain the concept of Blue Ocean Strategy. When you talk of value innovation, you need to reduce costs, increase buyer's value, and you have to see that cost structure is lowered through eliminating and reducing factors an industry competes on, but buyers do not value it highly. Buyers value is increased by raising and creating elements that industry has never thought of, and the industry has never offered and thought of. High value of sales growth is created through scarce of economics and further cost reduction. Normally, an effort is done to see the simultaneous pursuit of differentiation. That means you're differentiating from your competitor by going in for superior market value and lowering the cost.