Blue Ocean Strategy

Blue Ocean Strategy

Executive Summary

The Harvard Business Review “Blue Ocean Strategy” by W. Chan Kim and Renee describes the “business universe” and its two “distinct kinds of space,” the red ocean and the blue ocean. The article explains how the market space if divided by these two oceans. The red ocean symbolizes the industries that are currently in present in the market. These industries serve as models for current competitors as well as future ones. On the other side, blue oceans are industries that are “not in existence today.” These industries are unknown and could be developed from red oceans or from completely new industries. The main difference between these two types of markets is the customer demand. Red oceans have fixed demand and competitors constantly compete against each other for consumers’ acceptance and attention. Blue oceans create a demand that did not existed before, generating greater opportunities for growth.

Although the concept of red and blue oceans might be new for many, it has existed since the moment industries were created. In summary, red oceans are existing industries and blue oceans are unknown industries. When we look back, we realize that all industries that seem essential for daily tasks were once unknown. Long time ago, the pool of industries that conformed the red ocean was not as immense as it is today. As blue industries were introduced, the red ocean became larger. As of today, the Standard Industrial Classification (SIC) has been greatly expanded to include the new industries that have created throughout the years.

As mentioned above, blue oceans can be created from red oceans or from completely unknown industries. Not all companies are successful at achieving this. The first step is for companies to understand the difference between the two oceans. After that, management’s strategies and tactics determine if the new industry will be in the red or blue ocean. All companies have the “capacity to create new industries and re-create existing ones.” Now days, the opportunities for new industries are greater thanks to the technological advances and the unlimited communication around the world.

Three important aspects of blue oceans described in the article are:

• Blue oceans are not about technology innovation. Although technology influences the creation of new industries, it is not the determining factor. Management’s strategies and the use of technology are the factors that influence the creation of new industries.

• Incumbents often create blue oceans and usually within their core business. As previously discussed, blue oceans are sometimes the product of industries found within red oceans. Existing industries have the ability to restructure their core business to create new industries.

• Company