Blue Ocean Strategy

Most business schools today teach Porter’s Five forces model to their students. This model is certainly not the only model out there, but is it the best one? Some would argue that the model is lacking a sixth force – complementary products. Some would also argue that the Blue Ocean Strategy is more accurate strategy to use. In the Blue Ocean strategy the market universe is divided into two groups – Red and Blue Oceans. The Red Ocean represents the existing industries while the Blue Oceans represent the potential for new industries. A main difference between Porter’s model and the Blue Ocean Strategy is that Porter’s model is competition based while Blue Ocean focuses on creating a new industry where competition is not a factor. What this all boils down to is that it will depend on what your business intentions are as to which model you should apply.

For example let’s consider the situation of an existing company in the digital media industry. This company currently produces digital cameras. If this company wants to expand their product line into Blu-ray players they would most likely want to apply a competition based strategy to their business plan since that is an existing industry with several products available. Now, on the other hand, consider the same company wants to expand their product line to include a completely new product that has no other similar product on the market. In this situation the company would be creating a Blue Ocean. The authors of the Blue Ocean Strategy would refer to this as a “reconstructionist view” since they have now shifted their focus from creating supply to creating demand.

Some additional examples of companies taking a Blue Ocean Strategy would be:

• Wii game console
• Cirque du Soleil
• Pet Airways
• and many others

Sources:

http://blueoceanstrategy.typepad.com/creatingblueoceans/j_blue_ocean_strategy_pop_song/
http://www.blueoceanstrategy.com/
http://en.wikipedia.org/wiki/Blue_Ocean_Strategy