In today’s economy, most industries face fierce competition. Technological advances such as smart phones and social media have made the competition within industries even more fierce. Potential customers can ask for three contractors and have their pricing within minutes with companies like home advisor. How easy is it to search reviews on Amazon to make sure you are making the best purchase possible compared to the many choices that are available?
In Blue Ocean Strategy – How to Create Uncontested Market Space and Make the Competition Irrelevant (2015), W. Chan Kim and Renee Mauborgne explain how a company can pull away from the competition by delivering value to the client. Whether the owners of a company know it or not, they need to working toward operating in a “Blue Ocean.” The stiff competition experienced in a “Red Ocean” results in companies eroding their profit margins as they are primarily competing on price. Although it is not stated in the book, I believe the authors imagined companies competing in the “Red Ocean” are like sharks devouring each other.
The second chapter of the first section describes “analytical tools and frameworks” which are used to move a company from competing in a “Red Ocean” to a “Blue Ocean.” The idea is to decide what parts of the company’s operation need to be changed. Just as important is what needs to be eliminated. It can be easy for some to make additions to their operation without stopping redundant or unnecessary activities.
Additions are important to differentiate a company from its competitors. Eliminating unnecessary operations are what helps to control costs. The author wishes to advise executives how to profitably scale their company as opposed to just growing sales.
In addition to profitable growth, the strategies that I will read about in the upcoming chapters are designed to protect companies from their competitors. Many companies will have a “me too” attitude. They might state that they can do what their competitor can do but better and cheaper. This is how the “red ocean” works. By transitioning to a “Blue Ocean,” they can compete on different level. It allows for a company to command a higher profit margin because they provide value that others in their industry do not.
In the upcoming chapters, the authors will describe the methodologies that are required to take a company to the next level. I am looking forward to finding out more about this topic!
References:
References:
Kim, C. and Mauborgne, R. (2015) Blue Ocean Strategy – How to Create Uncontested Market Space and Make the Competition Irrelevant, Harvard Business Review Press, ISBN 978-1-62527-449-6
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