Monday 2 July, 2007

Blue ocean strategy

Blue Ocean Strategy is a way to make the competition irrelevant by creating a leap in value for both the company and its customers. Blue Ocean denotes all the industries that is not in existence today—the unknown market space, untainted by competition. Blue Ocean Strategy,
• Creates uncontested market space
• Make the competition irrelevant
• Focus on non-customers
• Create and capture new demand
• Break the value-cost tradeoff (Seek greater value to customers and low cost simultaneously)
• Align the whole system of a firm’s activities in pursuit of differentiation and low cost
• Ample opportunity for rapid growth in terms of profitability.

Blue ocean strategy applies across all types of industries from Consumer Product Goods to B2B, financial services, entertainment, IT, and even defense. New wealth is created by expanding the demand of the economy. The focus is making the right strategic moves and large R&D budgets are not the key to creating new market space. “Strategic move” is the set of managerial actions and decisions involved in making a major market-creating business offering and that have delivered products and services that opened and captured new market space, with a significant profitable growth. A good example in the auto industry is , GM created the blue ocean of emotional, stylized cars in 1920s, the Japanese created the blue ocean of small, gas efficient autos in the 1970s and the Chrysler created the blue ocean of minivans in the 1980s.
Among Indian brands, Tata motors is a notable brand in creating blue ocean strategy. Their plan to offer the Rs 1 lakh car is creating a new demand. To attract the Indian customers who are price, value conscious and those who intend to buy two wheelers. They are extending this strategy by recent new launches, Magic and winger. The main idea is create new segments in commercial passenger vehicles and extend its coverage of the entire spectrum of customer needs in mass transportation from the rural interiors to cities as well as the top-end luxury mass transportation segment.

Source: Chan Kim and Renee Mauborgne

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