Post on 02-Nov-2014
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Main idea of blue ocean strategy is that if firm wants to beat the competition, then the best way of doing it is to avoid it i.e. stop competing against competitors According to the approach of Kim and Mauborgne Blue ocean strategy, implies to create value innovation and drive the costs down and overall enhancing value for buyers in such a way that market boundary of a firm is redefined
Hence firm does not compete with existing players in the market but create a new transparent (i.e. why blue ocean) where there is absolutely no competition as market boundaries are changed or reconstructed. This they suggest can be done using four action framework i.e. elimination, reduction, increase, and creation.
Blue ocean is about where competition does not exist In internet search engine category, we credit Google and not Alta vista and such similar internet explore engines with creation of blue oceans. Thus, it is not necessary that competition does not exist. Competition may occur at initial stages only (early stages of industry growth), it may not be completely absent.
Value innovation as defined by authors is simultaneous persuasion of low cost and differentiation If value innovation is the cornerstone than the emergence of all new industries and all those industries which are not in existence today cannot be claimed to be as blue ocean strategy. Some product categories like VCR, TV when invented were not meant for mass of buyers and did not pursue low cost and differentiation simultaneously.
According to authors using ERRC/ Strategy canvas Apart from this, other ways - Taking advantage of innovation (technological/ process), create new industry all together - Occupy white space in strategic group - Occupy structural voids in value network
Note: - Occupying voids in value network is different from eliminating players from value network - Dell is blue ocean strategy by virtue of occupying white space in strategic group - White space was created by process innovation/ Business model innovation in which distributors and retailers were eliminated
Example of occupying voids in value network is to look for business opportunity in ecosystem of the industry Example: - Taxi beat services in Greece It uses the mobile technology to connect taxi drivers and passengers
taxi drivers advertise their location and availability to nearby passengers who are searching for a taxi using their Smartphone. If a passenger selects and calls a driver, then the driver pays Taxibeat a commission. If we look at taxi fleet service providers. Generally they run on the basis of popularity and brand name. For example, in India people prefer to use Meru Cabs or Radio taxi compared to conventional local taxis
because these branded taxi players provide more security, more professionally trained staff and more punctuality compared to non branded players. Generally we assign brand value to a company. It does not imply that taxi drivers who drive local taxi without being employed by any popular taxi fleet service provider are always bad at providing their services.
Taxibeat saw this gap and realized the business opportunity. It created a business model in which it could connect individual drivers directly with the customer. These taxi drivers got them selves affiliated to Taxibeat by paying some membership fees. Taxibeat kept record of customers feedback who travelled with a particular taxi drivers who is affiliated with Taxibeat.
When any new customer wanted a cab, he could search the driver using smartphone technology and could view the comments of past passengers about the drivers in the proximity area and thus based on past feedback culd select any cab driver.