The authors of the article have reviewed and systematized several extant theoretical literature on the Blue Ocean Strategy. The authors have made an attempt to describe the concept and focused on the importance of enterprise strategy successful implementation at enterprises. Moreover, the role of competition in achieving the strategic goals of any organization has been analyzed. The article briefly outlines two types of competitive behavior and describes the principles for implementing the Blue Ocean Strategy.
Key words: strategy, Blue ocean strategy, Red Ocean, innovations, competition.
Over the past 15 years, the Blue Ocean concept has become more and more popular. The authors of the book «Blue Ocean Strategy» W. Kim Chan and Renee Mauborgne argue that: «The Blue Ocean Strategy is about how to create a free market niche and stop being afraid of competitors» [1].
The relevance of the chosen topic lies in the fact that at the present stage of economic development, the priority is given not only to innovations and innovation processes at enterprises but also to actions of enterprises to combat competitors. This is a rather laborious process, even in a more or less free market, requiring additional time and financial costs. Therefore, enterprises that do not have a well-thought-out strategy of behavior on the market are unlikely to become strong players in a competitive environment, be it locally and or globally.
It is noteworthy to say that the market itself, the competition, and the strategic behavior of companies drive all participants to look for new forms of product promotion on the market and new methods of attracting potential buyers.
In the XXI century, this problem is becoming more and more urgent due to the growth of similar enterprises. To increase productivity, somehow simplify and reduce the cost of the technological process, many companies resort to innovative technologies, which they sometimes create on their own. In addition, the study of the main principles and tenets of the Blue Ocean Strategy enables top managers and owners of enterprises develop and master their entrepreneurial and creative abilities.
For the first time the term «Blue Ocean Strategy» has been mentioned by Kim Chan and Rene Mauborgne who are the authors of the book — the «Blue Ocean Strategy». This book is based on their fifteen years long research during which the authors of the concept use 150 successful strategies as examples over a time span of 120 years among 30 industries that have made the Blue Ocean Strategy a reality. The book has been translated into 40 languages of the world and sold over two million copies [2].
The study of the aforementioned authors included exploring the notions of competition and strategy. The meaning of the word «competition» is known to everyone. It is a rivalry, sometimes a struggle, between two or more market participants for the best production conditions or sale of products. In other words, competition as rivalry in any field between individual legal entities or individuals (competitors) interested in achieving the same goal [3]
The first definition to the term «strategy» was presented in the book «Competitive Strategy» by Michael Porter, which was published in 1980. Strategy, in his opinion, is the result of analytical calculations, depending on the position of the planning object in relation to the other participants in the external environment. That is, in practice, the developer of the strategy, using analysis, must choose the best of all possible options for success, so that managers can implement it.
Speaking about the development strategy of an organization, it is necessary to understand that the strategy, on the one hand, is deterministic or well-planned, and on the other hand, it is stochastic, i.e. formed under the influence of random factors. The mobility and instability of the company's external environment affects the predominance of one of these components, which ultimately affects the final strategy of an organization [4].
It follows from the foregoing that a strategy is a combination of quick decisions and planned actions to adapt the company to a changing situation, to new opportunities that allow obtaining competitive advantages and, of course, to new threats of weakening the competitive position of an organization.
The strategy covers various issues of the theory and practice of preparing an organization to conduct its activities, explores the patterns of the internal and external environment (economic, political and organizational components), develops numerous methods and forms of preparation for the implementation of strategic actions.
This way the strategy is a model that integrates the main goals of an organization, its policy and actions into a coherent whole. Strategy is not just an idea of how a company should behave in relation to a competitor. It also touches upon the deeper and more fundamental aspects of an organization's activities. At its potential, a strategy can deal with anything: products and processes, suppliers and customers, controls, the organization's own interests and social obligations, and so on.
A properly designed and formulated strategy helps to organize and allocate limited resources of a company in the most efficient way, taking into account changes in the external and internal environment of an organization.
In other words, the organization's strategy is a comprehensive set of long-term programs of action and political attitudes of an organization, within the framework of which the goal is achieved. It is to some extent a model of enterprise management, and, therefore, influences the formation of a way of thinking.
To sum up everything stated above, the strategy should be viewed from different angles:
— the strategy brings together different parts of an organization into a single whole;
— the strategy is a means of achieving the final result;
— the strategy covers different aspects of an organization;
— the strategy affects the compatibility of all the individual components of an organization;
— the strategy offers answers to the main key questions about the organization: what is the business today? What should this business be like tomorrow? What are the main products, functions and markets? What needs to be done to ensure that the goals are met?
— the strategy is the result of an analysis of the strengths and weaknesses of an organization, identification of its capabilities and obstacles to development;
— the strategy is a planned response of an organization to changes in the external environment [5].
The opposite to the concept of the «Blue Ocean Strategy» is the concept of the «Red Ocean», an environment in which a fierce struggle is waged for each consumer, in which competition is at the highest level and, moreover, the players of the «Red Ocean» are not always ready to act according to the rules and laws of competition.
Table 1 presents a comparative analysis of the main points of the strategies of «Blue» and «Red» «Oceans».
Table 1
A comparative analysis of the Blue Ocean and Red Ocean strategies
|
The Blue Ocean Strategy |
The Red Ocean Strategy |
|
The idea is to create a new, uncontested market place |
Business is done in the existing market place |
|
Competition is totally irrelevant |
Focus is on the beating the competition |
|
Creating the new demand |
Using the existing demand |
|
Value cost-trade-off is not so relevant |
Value cost-trade-off is important |
|
The whole system of company activities aimed at the pursuit of products differentiation and low cost |
The whole system of company activities focused on the strategic choice between products differentiation or low cost |
|
Note: based on source [1] W. Chang Kim, Mauborgne, Blue Ocean Strategy (2005), p. 18 |
|
As it can be seen, these strategies are fundamentally different from each other. Companies that are stuck in the Red Ocean tend to follow the traditional approach, seeking to be in the best position to defeat competitors within the industry's order. The creators of «Blue Oceans» are not equal to their competitors. Instead, they subordinate their actions to a different strategic logic called value innovation. Value innovation is a new way of thinking and executing strategy that creates a Blue Ocean and moves away from competition. Value innovation implies that the same emphasis is placed on both value and innovation.
Table 2 provides examples of companies practicing the Blue Ocean strategy.
Table 2
Blue Ocean strategy and examples of companies
|
Company and country |
Industry |
A brief description |
|
|
1 |
Cirque du soleil (France) |
The circus sphere |
Cirque du Soleil did not win in a dying circus industry, which was focused solely on children; instead, it took the best from the classic circus, added innovation and attracted an audience of solvent adults. |
|
2 |
Flysurfer (France) |
Production of several types of kites |
This company manufactures its products in the most advanced aviation sports programs and is the only manufacturer to test its materials in a wind tunnel. This is what keeps Flysurfer one of a kind. The innovative solutions and intensive test results of kiteboards are exclusive in the entire market. For instance, they produce special devices for jumping and towing a person through water, snow or land. |
|
3 |
Canon (Japan) |
Copier machines manufactu-rer |
Canon has created a new market space by shifting the target audience of the copier industry from corporate customers to direct copier users. Small, compact and easy-to-use, Canon printers created a new market space by focusing on the key competitive advantages: for example, the company has been dealing with secretaries who work with these printers. |
|
4 |
Tile (USA) |
Mobile device |
Tile's GPS key fob is a device slightly smaller than a matchbox that houses a Bluetooth transmitter. The company has launched a specially developed application for a mobile phone or tablets which uses GPS tags, memorizes the coordinates of the location of the GPS Tile key fob and, if necessary, displays this position on the map. |
|
5 |
Ikea (Sweden) |
Furniture Production |
Ikea products are known for the level of detail that is incorporated into their designs — their furniture can often be assembled even without tools. This fact is organically inscribed in their marketing. The brand has placed customer experience at the heart of their marketing strategy, driving it not only at individual needs and touchpoints, but also through the entire buying cycle. |
|
Note: source [6] |
|||
The main peculiarity of the Blue Ocean Strategy is in the fact that this approach is grounded on «value innovation» (a combination of novelty, practicality and low costs). Value innovation is not a competitive advantage, but something that makes competition meaningless as the company moves to a fundamentally new level. Companies that discovered new market spaces used the logic of «value innovation», as a result, they were able to develop without the fear of competition, to form and get a new flow of demand.
Thus, the development and implementation of the Blue Ocean Strategy is based on the following principles:
- Reconstruction of the market boundaries.
The first principle of the Blue Ocean Strategy is to reconstruct the boundaries of the market in order to break out the world of competition and create a Blue Ocean.
- Focusing on the big picture, not numbers.
This principle is fundamental for reducing risks. Here, an alternative approach to the existing strategic planning process is being developed, based not on the preparation of documents, but on the creation of a strategic canvas. This approach invariably results in strategies that unleash the creativity of employees, helping the company see Blue Oceans.
- Going beyond the existing demand.
It is a key ingredient required to achieve value innovation. The company must challenge two traditional strategic practices. The first is focusing on existing customers. The second is the pursuit of greater segmentation in order to accommodate differences among buyers.
- Adherence to the correct strategic sequence.
The next challenge is to create a sustainable business model. This leads to the fourth principle of the Blue Ocean Strategy: maintaining the correct strategic sequence. Value to the buyer, price, cost and implementation are elements of a correct strategic sequence.
The authors of the article made an attempt to describe the concept of the Blue Ocean Strategy firstly developed and proposed by such researchers as W. Kim Chan and Renee Mauborgne. This was a review of existing studies on the topic. This way, it can be concluded that creating Blue Ocean Strategy requires huge efforts and detailed study of all scenarios in the development of events at an enterprise. There are many examples of successful Blue Oceans, despite the fact that many executives find it challenging to create Blue Ocean Strategy. Nonetheless, the authors of the concept have proposed finding uncontested market space to implement the Blue Ocean Strategy and recommend company executives to look for all ways to create conditions for value innovations.
References:
1. Kim W. C. & Mauborgne R. (2005b). Blue ocean strategy: How to create uncontested market space and make competition irrelevant. Boston: Harvard Business School Press.
2. Kim W. C., Mauborgne R. How strategy shapes structure. // Harvard Business Review. 2009. 87(9). P. 72–80.
3. Kuratko D. F., Audretsch D. B. Strategic entrepreneurship: Exploring different perspectives of an emerging concep // Entrepreneurship Theory and Practice. 2009. 33(1). P. 1–17.
4. Ackermann, F., & Eden, C. (2011). Strategic management of stakeholders: Theory and practice. Long Range Planning, 44, 179–196.
5. Allard, K. (2004). Business as war: Battling for competitive advantage. Hoboken: John Wiley & Sons, Inc.
6. Полуян Е. В., Брагина М. П., Кузнецова Е. Л. Стратегия «голубых океанов» как современное направление в развитии бизнес-процессов // Научно-методический электронный журнал «Концепт». — 2017. — № S13. — 0,5 п. л. — URL: http://e-koncept.ru/2017/470158.htm.
