A Business Strategy That Could Change The Way We Do Business

A Business Strategy That Could Change The Way We Do Business by Zigfred Diaz

A friend and I talked about a unique business strategy over a cup of coffee one afternoon. I was so intrigued by the idea so I did a little bit of research on the subject. This strategy is what is known as the Blue Ocean Strategy. The Blue Ocean Strategy is a corporate strategy that aims to tap unclaimed markets making competition irrelevant. The strategy is embodied in the book entitled "Blue Ocean Strategy" by Professors W. Chan Kim and Renee Mauborgne and Published by Harvard Business School Press.

According to the book, "Blue Ocean" refers to an untapped market, wherein there is only little or no competition at all enabling anyone to claim the market for his own. On the other hand "Red Ocean" refers to a market where competition is very high. In this situtaiton, the market is considered as very crowded already since almost everybody is producing the same type of service and the same kind of goods.

The Blue Ocean strategy is simply to innovate something; something that makes people give a higher value for a certain product or service. Since doing this would require additional cost, the cost that is incurred by the value added is reduced by eliminating product or service features that the market does not really care about.

To further drive home the point, it is necessary that a Philippine based or a "local" example be given. An example on how the Blue Ocean Strategy was used here in the Philippines can be seen by studying the strategic moves of the Gokongwei group of companies who owns Mobile phone company, Sun Cellular and airline Cebu Pacific among other companies.

A new untapped market was opened by Sun Cellular by adding value to products already found in existing markets. They achieved this by making calls within their network free. This is a very wise move considering that the market for mobile phones has already been saturated by both Smart and Globe. As a result, people are buying into this "new market." This is evidenced by the fact that most people in the country have a sim card and a cellphone for Sun Cellular and another sim card and a phone for other networks. Others have two sim cards in a dual sim phone.

What people really want, is to "fly" and in order to do this fares have to go down. This is exactly what Cebu Pacfic did in the Airline industry. They created a "new market" by slashing down their fares, since this is really what people want. People don't really care about a a hot meal or a newspaper. What they want is to fly. Eliminating these other cost, helped Cebu Pacific give value to what people really want, forcing people to buy into this "new market."

In order to survive, traditional Business strategy would normally want to "crush the competition." However Blue Ocean Strategy dictates that we "Create new markets with little or no competition." "Strategic thinking" is resorted to instead of the traditional business approach of "Strategic Planning." In Blue Ocean strategy we do not talk of "cutting prices" to capture a market, Instead we refer to it as adding "value" to products and services to claim an untapped market.

The critiques argue that the principles and ideas that are said to be unique to the strategy can also be found in other traditional business strategies. The say that Blue Ocean Strategy has already existed a long time ago.

However this line of thinking is not justified. A new theory is always built upon something that has already been accepted for a long time as a scientific principle or even theory. (As similarly as the theory of relativity rest upon the foundations of the principles of electricity, gravity, thermodynamics etc.) Our way of discovering something is built upon the knowledge that has been universally accepted by the majority. No matter what the critics say, it is certain that Blue Ocean Strategy is here to stay. In the years to come, it will surely have an effect on the way future entrepreneurs, managers and leaders will think and do business.

About the Author
Know more about business strategy. Visit the blog of Zigfred Diaz. Learn more about other diverse topics such as law, leadership, management, entrepreneurship, finances, investments, technology, internet marketing, blogging, Theology and life.

Source: http://www.goarticles.com/cgi-bin/showa.cgi?C=743350