Question

1. What is a blue ocean strategy? What is a red ocean strategy? Explain these from the perspective of company, competition, costs, and markets
2. The authors allude to the fact that most companies borrow their strategic thinking from military models (see ‘Paradox of strategy’). How does this model affect perceptions related to competition and customers and what are the implications for creating value for markets (and employees!)?
3. Using the ‘Snapshot of blue ocean creation’ exhibit, list and explain the key success factors for the three industries (auto, computer, movie theaters).
4. The authors claim ‘demand is created rather than fought over’ in blue oceans. What does this mean? Cite examples from the article.
5. Explain the redefined relationship between ‘value’ and ‘low cost’ in blue ocean strategies. What is the traditional basis of ‘competitive advantage’ in red ocean strategies?

Answer 1

Answer:

Blue Ocean strategy is about creating and capturing uncontested market space, thereby making the competition irrelevant. It is pursuit of low cost to open up a new market space and create new demand. Blue ocean strategy has been effective in providing sound management and can can be implemented at all levels of public service and can cut costs in management operations to achieve desired results. In Blue ocean strategy, competition is irrelevant because the rules of the game are waiting to be set. A blue ocean is an analogy to describe the wider, deeper potential to be found in unexplored market space. A blue ocean is vast, deep, and powerful in terms of profitable growth

Blue ocean strategy comes with a complete set of analytical tools and frameworks for formulating and executing a blue ocean strategic move. Some of them are:

• Value Innovation
• Strategy Canvas
• Four Actions Framework
• Six Paths Framework
• Three Tiers of Noncustomers

Red ocean strategy involve the commoditization of the industry where companies are competing mainly on price and requires overcoming an intense level of competition. It  aims to fight and beat the competition and involves competing in industries that are currently in existence. Successful trail-blazing organizations will attract competition, creating a red ocean. A Red Ocean Strategy ultimately leads to an organization choosing to follow one of two strategies – differentiation or low cost. Whichever is chosen the organization must align all activities with one of these strategic directions.

They focus on the value/cost trade-off. The value/cost trade-off is the view that a company has the choice between creating more value for customers but at a higher cost, or reasonable value for customers at a lower cost.

Here is the summary of both the blue and red ocean strategy from the pespective of company, competition, costs, and markets:

Blue ocean strategy:

• New Market creation
• Make the competition irrelevant
• creat new demand
• break the value cost trade-off
• Align the whole system of a firm's activities in pursuit of diffrenciation and low cost

Red ocean strategy:

• Compete in existing market place
• Beat the competition
• exploit existing demand
• make the value cost trade-off
• Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost.