Blue Ocean Strategy . . . The future trend of Business strategy ?

I was in Star Bucks Club Ultima this afternoon to talk with an acquaintance  regarding a new business that he is planning to start.

One of the things that he mentioned was this unique business strategy that’s quite different from what we traditionally learn in business school. According to him, this strategy sorts of deviates from normal business concepts that we hear and read from the usual management gurus. This strategy is called “Blue Ocean Strategy”

I was intrigued by the idea so I did a little bit of research on the subject. Blue Ocean Strategy is a corporate strategy that aims to tap unclaimed markets making competition irrelevant. The strategy is embodied in the book entitled “Blue Ocean Strategy” by Professors W. Chan Kim and Renee Mauborgne and Published by Harvard Business School Press. The authors claim that the Blue Ocean Strategy is a result of several years of study of strategic moves by over 30 industries in a span of 100 years.

In the book, “Blue Ocean” refers to an untapped market, a market wherein there is only little or no competition at all enabling anyone to claim the market for his own since it is not yet too crowded. In contrast, “Red Ocean” refers to a market where competition is very high. The market is considered as very crowded already since almost everybody is producing the same type of service and the same kind of goods.

The Blue Ocean strategy is simply to innovate something; something that makes people gives a higher value for a certain product or service. Since doing this would require additional cost, the cost that is incurred by the value added is reduced by eliminating product or service features that the market does not really care about.

In order that this can be understood well a “local” application must be cited. According to my friend a classic example of how the Blue Ocean Strategy was used here in the Philippines is the strategic moves of the Gokongwei group. As we all know, the Gokongwei group owns Mobile phone company, Sun Cellular and airline Cebu Pacific among other companies.

Since the market for mobile phones has already been saturated by both Smart and Globe, what Sun Cellular did is to create a “new market” by adding value to products already found in existing markets. As a result of this “added” value, (By making sun to sun calls free) a new untapped market was opened. It could be said that Sun Cellular is not competing directly with Globe and Smart but rather they have raised awareness among the people to buy into this “new market.“ As a result, most people now have two cellular phones or two sim cards in a dual sim phone. In this way Sun Cellular is not “out-performing” Smart and Globe but rather they have created a new market, making competition irrelevant.

In the airline industry, Cebu Pacific has managed to apply the Blue Ocean Strategy by adding “value” to what people really want, which is to “fly.” People don’t care about a newspaper, a hot meal or a fancily dressed flight stewardess. What people care about is that they can “fly.” In order to do this airline fares must go down since this is what people care about. This in a sense allowed Cebu Pacific to tap into the “untapped” market. The existing market is referred to as “customers who can only afford to fly.” The untapped market is “every can fly.” This is embodied in Cebu Pacfic’s advertisement “Now every JUAN can fly” (A play on the words “every juan” = “everyone”, with “J” being pronounced as “H”, Juan is the “universal” first name of Filipinos just like John is for the Americans) Cebu Pacific has managed to slash down fares by reducing cost on service features that most people do not really care about such as hot meals etc.

Being involved with the International Marketing Group (IMG), I can now clearly see that they have employed the Blue Ocean Strategy in the way they do business. Although IMG is perceived by most people as a typical insurance marketing company, IMG distinguishes itself with a unique mission.

I do not know if IMG is employing the blue ocean strategy consciously, however I can see that they are implementing the Blue ocean strategy in the way they do business. Instead of selling insurance products directly, IMG teaches it’s clients and brokers the concepts of financial planning and management. (albeit not in a very organized manner) Product is not given primary importance. The financial broker shows his client his need for financial planning. The financial broker who is well versed in financial planning concepts then introduces products that suits the client needs. The untapped market of financial planning needs by the people is claimed by IMG and the added cost for this value service is compensated by reducing cost with regards to training agents and marketing efforts since IMG works on a model that allows insurance and financial services company to “outsource” their marketing and training. Other insurance companies have already followed this path. The trend now is that insurance agents are now becoming financial planners.

The business proposed by my acquaintance had a similar concept but it is something more than financial planning. He wants to introduce a value added service to clients that will enable him to add value to existing service in order to capture “untapped markets” However I could not discuss the details of the plan yet, but I am sure that employing the Blue Ocean Strategy would enable him to succeed in the new business that he is thinking. Perhaps in the proper time I could help him promote his business by writing an article on it, probably when the final details of the plan have been ironed out.

In Traditional Business strategy we talk about “crushing the competition” whereas in Blue Ocean Strategy we talk about “Creating new markets with little or no competition.” Instead of “Strategic Planning” Blue Ocean Strategist resort to “Strategic thinking.” Instead of “cutting prices” to capture a market, Blue Ocean Strategy is to add “value” to products and services to claim an untapped market.

I could personally say the Blue Ocean Strategy is a unique strategy. Critiques may say that the Strategy has already existed a long time ago and that principles that are said to be unique to the strategy can be found in other traditional business strategies as well. For me, the critics may just be jealous that they were not the first ones to embody the “strategy” in compact form. The critic’s contention are not valid at all since our way of discovering something or learning something is to build upon the knowledge that has been universally accepted by the majority. A new theory is always built upon something that has already been long time accepted as a scientific principle or even theory. (Just like the theory of relativity rest upon the foundations of the principles of thermodynamics, electricity, gravity etc.) Whatever the Critics have to say, the strategy certainly is here to stay and is sure to have an effect on the way future entrepreneurs, managers and leaders will think and do business in the years to come.

Want to know more about the Blue Ocean Strategy ? Get it at Amazon today !

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8 Responses to Blue Ocean Strategy . . . The future trend of Business strategy ?

  1. Jon Ramos says:

    Indeed a truly exciting strategy. Infact to validate further, companies have long engaged in head to head competition in search of sustained, profitable growth. They have fought for competitive advantage, battled over market share, and struggled differentiation.

    But in today’s overcrowded industries, competing head-on results in nothing but a bloody “red ocean” of rivals fighting over a shrinking profit.

    Which is why, Premiere Business Asia as a Financial Planning Firm provides a systematic approach to making the competition irrelevant. And with the growing market demand and evolution of market needs, We present a proven analytical framework and tools for our professional affiliates and financial planners to succesfully create and capture blue oceans.

  2. zigfred says:

    Thanks for the comment Jon. Just to let you all know that Jon Ramos is one of the only few financial planners here in Cebu City. Among the few financial planners here, he is also regarded as one of the best. Visit his website http://www.premierebusinessinc.com if you wish to avail of his services.

  3. jess of IMG says:

    bro, i’ve read about BLue Ocean Strategy before.it’s a good concept. In IMG/WFG, they have conducted International Conventions and big events for years. I’m pretty sure, that in Financial Industry, smart people have already thought of some concepts and system that offer value for money,more profit and wider market. Blue Ocean is one. I may agree with you when u said that ur not sure IMG or WFG is employing the strategy consiously or unconsiously, but this we can br sure, the system has been tested and tried for 20 years, by the great leaders and great minds in the Financial Industry – and it works! It works in the different countries, even.

    As a broker bro, what i know is we can truly offer value for money sa atu clients, aside sa increase profit and wider market on our side.

    In the U.S. bro, people often say ” I’ll consult first my broker…”
    In the phils, we’re initiating it. because, as a Broker, we do not have a bias on a certain company , therefore we can recommend what’s best according to clients needs.
    As an effect, we help spread the risk. since we offer healthcare, mutualfunds, pre-need, etc. and all under different companies. The normal agents, may encourage clients to “put money in one basket”… because it’s under one company, all needs in one company – more risk.

    secondly , a client will contact his broker for all needs when it comes to financial services, thereby lessens the risk of going to different people he might not know, to offer services he needs.

    thirdly bro, as a broker, we can offer a package to clients. Example, if my client buy Kaiser Healthcare – annual mode, i could offer a Personal Accident insurance for free, worth 100k to 1M from MAA. or if she buys Kaiser for all her family members, as a broker, u cud offer Personal Accident insurance for her and his spouse.etc.. Value for Money, More Profit, Wider Market…. bro, what’s more important is the MISSION.
    We can be in any business, under a proven system or so, but if without a mission, it’s futile. The mission of IMG bro, is to HELP CREATE WEALTH FOR FAMILIES. Thru the financial concepts that we teach, thru the business system that we are using, thru the lives that we change because we taught them and guide them apply what they learn, it’s simply a great business. since no one can defeat a person with a mission, a company like IMG, we have the world to conquer!

  4. zigfred says:

    Right on Jess ! My friend Jess Faller here is a marketing director with the International Marketing Group (IMG) He is one of of the best presentors if not the best presentor among all the MDs who conduct BPM seminars.

  5. asia travel says:

    i am looking for information on how to travel cheap in asia and your post has given me some ideas, wish you all the best – CHEERS .

  6. zigfred says:

    To Asia Travel : Fly Cebu Pacific. Check out their website. Just type Cebu Pacific and it will take you to their page.

    Cebu Pacific does not only fly within the Philippines. They have international destinations within Asia as well. Its real cheap and its much more cheap if you book in advance.

  7. Pingback: Applying the Blue Ocean Strategy in Bar exam review | zdiaz.com - A higher calling

  8. nino macasera says:

    amazing.

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