Blue Ocean Strategy
By W. Chan Kim and Renée Mauborgne
1. What are the key issues addressed in the article?
Many companies are confining themselves in the overcrowded industries. With that confinement there is no way to sustain high performance. The real opportunity is to create blue ocean market that are uncontested and without competitors.
The business universe consists of two distinct kinds of spaces including red oceans and blue oceans. While red oceans represent all the industries in existence today ? the known markets, blue oceans denote all the industries not in existence. Red ocean markets are defined with clear boundaries and well understood competitive rules. Blue oceans provide another scenario. They are untainted by competition. In blue oceans, the demand usually is created rather than fought over.
There are two ways to create blue oceans. Companies can give rise to completely new industries with the example of eBay in the online auction. Or a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry.
Blue oceans seem to remain the engine of growth. As trade barriers between nations and regions are falling down and information on products becomes globally available, niche market and monopoly havens are hard to exist. Meanwhile, demand does not increase rapidly. The result is that supply overtakes demand. Maintaining the high margins and differentiated brands becomes harder ever in the overcrowded industries.
In military term, strategy is all about red ocean competition where "generals" will do all their best to drive the opponents from the battlefields. Focusing on red oceans therefore means accepting the key constraining factors of war: limited terrain and the need to be ...