The Blue Ocean Strategy is a model developed by Renee Mauborgne and Cham Kin. The model was first published in their book in 2005. The Blue Ocean Strategy came out as a critic of Porter’s five forces model. Porter’s model provides a criterion that business owners can use to determine if their business will be competitive and profitable based on the performance of other businesses in the industry. Kim and Mauborgne proposed a model that would create uncontested markets for any business. The authors’ idea is to move business businesses from “red oceans” where business compete against each other to win customers to “blues oceans” where businesses have no competitors.
Kim and Mauborgne provided a guideline that business owners can use to formulate and implement this strategy. Businesses must first shift their focus from outdoing their competitors’ strategies to creating new markets that no other businesses in their industry have exploited. Kim and Mauborgne outlined four actions that will help businesses create their own blue ocean strategy. The first action is to consider the factors that an industry ignores or takes for granted that should be eliminated. The second action is to consider the factors that should be raised above the current industrial standards.
The third action plan in the blue ocean strategy is to identify the factors that should be lowered below the industry’s standard. The last action is to consider the factors that should be introduced or created have not been offered before in the industry. By implementing these four action plans, businesses will create new value curves. The framework encourages businesses to shift from traditional models that push businesses to choose between product differentiation and cutting costs. The model allows businesses to pursue both goals simultaneously. In addition, this framework helps businesses to scrutinize each factor that an industry competes on thorough and identify “blue oceans” in the process.
The blue ocean strategy differs from the read ocean strategy in that it helps businesses create uncontested markets. In the red ocean strategy, businesses compete in existing markets. Kim and Mauborgne’s model focuses on creating and capture new demands while the read ocean strategy focuses on exploiting existing demand. Another notable difference between the two strategies is that the blue ocean strategy makes competition irrelevant while the red ocean strategy emphasizes on beating competition. Unlike the red ocean strategy where companies choose between differentiation and low cost strategies, the blue oceans strategy enables companies to purse both goals simultaneously.
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