How to Create Uncontested Market Space and Make the Competition Irrelevant

Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant

Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant W. Chan Kirn & R. Mauborgne Harvard Business School Press (2005) 240 Pages, Hardcover, $27.95

For readers concerned with matters of business strategy and, in particular, with competitor analysis and market positioning, Chan Kim and Mauborgne's work should be familiar indeed. The piece presently under review represents the garnering and refinement of over a decade of collaborative research hitherto published in the top journals in both strategy and international business, and that is pitched squarely at the practicing manager. Based on the study of more than one hundred and fifty "strategic moves" (managerial decisions and actions delivering products/services that opened and captured new, untapped/uncontested market space or "blue oceans") in more than thirty wide-ranging industries, the authors argue that extant work on business strategy is misguidedly focused on "red oceans" or the savage, zero-sum competition for share in known and shrinking market space. In accounting for the roots of competitive advantage, they argue that it is the aforementioned strategic moves, rather than company or industry characteristics, that are the crucial analytical units. In this context, firms' strategic focus should shift from competitors to "alternatives" (goods/services with the same purpose but with different functions and forms), and from customers to "noncustomers" of the industry in which it resides. Utilizing their example of Cirque du Soleil to illustrate this point, the latter achieved rapid growth in a short time by breaking down market boundaries by focusing their creative attention on alternative market offerings to circuses (e.g. theater), but also by focusing on noncustomers (e.g. adult theater customers).

Their central thesis, then, is that successful firms like Cirque du Soleil or casella Wine's [yellow tail] are 'Value innovators" who look beyond the traditional Porterian structural/environmental determinism and make the competition irrelevant by creating a leap in value for customers and the company alike with "market-creating business offerings"; by successfully pursuing differentiation and low cost simultaneously, breaking the traditional value-cost tradeoff. They achieve this by radically reconstructing buyer value attributes, asking four fundamental questions; the first, 'Which of the attributes that the industry takes for granted should be eliminated?' and the second, 'Which should be reduced well below the industry's standard?' allow an insight into how firms might reduce cost. Further, 'Which attributes should be raised well above the industry's standard?' and 'Which should be created that the industry has never offered?' allow firms to lift customer value and grow new demand. To utilize an example from one of then* earlier works, that of Southwest Airlines, the latter created untapped market space in the guise of short-haul air travel by eliminating meals, in-flight films, designated seats, multiple seating classes from first to economy, membership in an airline reservation system, central airports, and hub-and-spoke route system, radically reducing their costs. Simultaneously, they created the concept of frequent point-to-point flights, with fares often 60 percent below competitors', plastic reusable boarding passes, airports in small cities or smaller, less-congested airports in larger cities and 15-minute gate turnarounds (against 35 minutes for the average carrier). By focusing on the key discriminating factors leading consumers to fly or else drive their cars, and eliminating or reducing everything else, Southwest inserted itself creatively between airlines and surface transport, thereby creating a new and highly profitable "Blue Ocean" market segment.

The book contains nine chapters in whole that are organized into three thematic parts; Conceptualization (chapters one and two), Formulation (chapters three to six), and Execution (chapters seven to nine). Notwithstanding the somewhat pithy title and the virtual barrage of often gratingly-labeled conceptual and analytical tools, frameworks and maps that seem to accompany practitioner-focused works of this nature, Chan Kim and Mauborgne's message is ultimately compelling. The present reviewer has much utilized the authors' ideas and novel case studies in graduate courses in both business economics and in strategic management, particularly in exploring the notion of defining competition in terms of substitute and alternative market offerings. Further, the authors exemplify all of their ideas with fresh and novel case study vignettes from a range of industries (examples of which include the US wine industry, corporate air travel, Japanese telecommunications, the US fitness industry, the insulin industry, and the Mexican cement industry) that practitioners and students alike can easily relate to. In summary, the volume should be of interest not only to strategic management practitioners, but also to teachers of business strategy, marketing, competitive analysis, and business economics.

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