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“Eagles Don’t Flock”
Shubhra Johri, Omika Bhalla, Neha Awasthi
Abs tract— Customer is no wonder the king, b ut to assume that he is the only king in the world is stupid. To depend on customers to achieve growth is not a very good idea, the aim should rather b e to grab non – customers b y creating new, uncontested opportunities and demand for the product.A small frog in the w ell know s nothing about the ocean. Similarly the organizations w ith myopic vision don’t know about the opportunities beyond horizon. They are too busy f ighting the competition to realize the pow er of inf inite. Their concern is just to exploit the existing demand.When the various supply side means/f actors to capture the market f ail, then the demand side f acto rs become crucial. To create new demand f or the product by penetrating the same market through various tools like pricing, promot ion etc. increases demand but to a certain extent. Similarly developing our product f or the same market increases the demand again to a certain extent. Like everything else there are limitations of the market. Limitations of the f inite. So the key is to explore a new market. This new market becomes even more crucial w hen our competitors are not aw are about its existence. Considering this the aim must be to go b eyond the f inite into the unexplored, unf amiliar, uncultivated w orld beyond.
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Infinite is always intriguing…the one who discovers even a minutest part of this infinite becomes the master in his era. This applies to all the aspects, all the dimensions, all the parameters of mankind. Companies constantly thr ive to find out ways to maximize w ealth , they try to apply this theory to become r ich.
‚A competitive wor ld offers two possibilities. You can lose. Or , if you want to win, you can change.‛
Or ganisations have long engaged in head - on competition in pusuit of incr eased mar ket shar e, sustained gr owth and higher pr ofitability . Trying to outper form the r ivals to attain a gr eater shar e of existing demand has been the business mantra for so long.. The focus generally has been on building advantage over the competitor s by assessing what competitors do and striving to do it in an even better way Yet, in today’s overcr owded mar kets, competing head- on r esults in nothing b ut a b loody ‘r ed ocean’ of r ivals fighting over a shrinking pr ofit pool characterized by incr easing levels of commoditization . With older ways of competition dying out and turning out into a no r esult situation companies ar e now focussing on n ewer and better ways of staying ahead of competition. It takes a new way of thinking ….a new paradigm... Situations can no longer b e handled in the same w ay as w er e done in the past.
Very rightly put into w ords by Alb ert Einstein ‚ The
significant problems that we face cannot be solved at the same
level of thinking we were at when we created them” In other words we need a paradigm shift…..”
If w e can think of the mar ket as a univer se we w ould be finding that it is composed of two sorts of oceans: one wher e the ocean is r ed with the blood of business gladiators who cut each other to shr eds with competing offer ings and the other is a blue ocean which is calm, smooth with little or no competition for anyone w ho w ould ‘dive in’,.
Red Ocean r epr esent s all the industr ies in existence today. This is the known mar ket space. Blue Ocean denotes all the industr ies not in existence today. This is the unknown mar ket space.
If a company is r unning in an alr eady known mar ket playing the same game cr eated and dominated by the other competing companies following the same r ules then it is said to be operating in the Red Ocean mar ket . Such companies battle incumbents head-on.
The Red Ocean is wher e every industry is today. Ther e is a defined mar ket, defined competitors and a typical way to r un a business in any specific industry . Such industries ar e obser ved to have the same behavior as is observed in a shar k infested ocean wher e the shar ks compete mercilessly shr eding each other for the same pr ey turning the surr ounding water s bloody , hence the name r ed ocean . The ocean is r ed with the blood of business gladiators who cut each other to shr eds w ith competing offer ings .Such companies ar e fighting against each other for the captur ing the same mar ket ar ea .With competition pr oliferating, the pr ospects for pr ofits and gr owth get r educed.as the same chunk of mar ket has to be shar ed betw een the competitors So in a nutshell the gain of one competitor is at the cost of the other competitor…
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In the r ed ocean or ‘head-to-head competition’, the only choice that the firm has, to survive the competition is to pur sue either differ entiation or a low cost strategy . The focus is maj or ly on what the r ivals ar e doing and devising ways to do it better and adapting to external tr ends as they occur . .So competitive positioning has to be done w ithin the bounds of an alr eady defined mar ket.
Companies in r ed oceans mostly follow competitive-based strategies, tar geting to get a bigger shar e of the mar ket fr om their competitors. As mor e player s enter the same mar ket, competition gets even tougher and pr ices ar e inevitably slashed down. In other w or ds, the playing field becomes an ar ena of cutthroat competition.
Mar gins tend to be low becaus e customer s have many identical options to choose fr om. Customer s view r ed ocean pr oducts as commodities . Thus with such a str ategy in mind companies adapt their behavior (strategy) to the existing industry's conditions.
How ever , this appr oach is limited. Due to globalization, low er ing cost of pr oduction and availability of infor mation, the competition is fiercer some than ever in most industr ies, putting mor e pr essur e on companies and shrinking their pr ofit mar gins. In this competition race, pr oducts and ser vices tend to become commoditized much faster .
Very aptly put into wor ds : “In business, the competition will bite you if you keep running, if you stand still, they will swallow you.so you need to keep going …keep going at a steady pace with a new insight a new vision and a phased and planned strategy”.
Blue ocean str ategy as against the conventional str ategy , assumes that str uctur e and mar ket boundar ies exist only in the minds of managers and pr actitioner s who hold this view do not let existing mar ket structur es limit their thinking. To them, untapped mar ket always exists and that extra demand has to be cr eated The cr ux of the pr oblem is how to cr eate it. This, in tur n, r equir es a new way of thinking shifting the focal point fr om ‘mer ely competing’ to
‘value innovation’—that is, the cr eation of innovative value
to unlock new demand. This is achieved via the
simultaneous pursuit of differ entiation and low-cost… Instead of focusing on beating the competition, they focus on making the competit ion irr elevant by cr eating a ‘leap in value’ for buyers, ther eby opening up new and uncontested mar ket space.
When Sir Isaac Newton thought of the r ationale behind the apple falling fr om a tr ee, he did not know he would discover the concept of gravitational force, nor was he sur e whether his thought would r esult in a fr uitful finding. The
idea was j ust to think of something that no one w ould have thought , in hopes of finding what no one else had found. The blue ocean str ategy is aptly named because it als o pr opagates a similar concept wher ein businesses explor e new horizons rather than pursuing the existing ones. For this r eason, discover ing blue oceans r equir es a certain level of innovation. But once a new mar ket is established, businesses in these mar ket s enj oy unfetter ed gr owth and can easily establish themselves as leaders in a mar ket they cr eated in the first place
Blue Oceans ar e those industr ies that don't exist today. It is the new , unknown mar kets wher e pr ofitable opportunities abound. Blue Oceans ar e undiscover ed mar kets. Blue ocean companies offer pr oducts and services that ar e so full of value that customers pay pr emium pr ices for the better value. Competition is scar ce (and the water r emains blue) because blue ocean mar kets tend to be new . Cust omer s ar e pleased because blue ocean offerings contain featur es beyond those found in typical (r ed ocean) products. Customer s w illingly pay higher pr ices for the incr eased value found in blue ocean pr oducts . The pr oduct can be sold at a pr emium, but the category being new , the r isks ar e higher . The key to survival is being the first entr ant, and quick movement to discourage entry of competitor s by establishing barr iers such as patents, or leveraging superior brand name
The idea ther efor e is to do something differ ent fr om everyone else, pr oduce something that no one has yet seen, ther eby cr eating a ‚Blue Ocean‛.
1. Focus on Curr ent Cust omer s vs. Focus on Non Cust omer s. In Red Ocean str ategy the focus is maj or ly on the curr ent customers but in the Blue Ocean, ther e is a focus on trying to incr ease the size of the mar ket by attracting new customer s.
2. Compet e in Exist ing Mar kets vs. Cr eat e
Uncont est ed Mar kets t o serve. While Red Ocean strategy believes in competing in existing mar kets, the Blue Ocean strategy gener ally aims at cr eating uncontested mar kets . Existing mar kets ar e all the customers doing business in the industry right now , whether they ar e doing business w ith you or your competitors. If someone w ins a customer , then it is assumed, someone will lose a customer . For someone to w in, someone must lose. In uncontested mar kets, ther e is only a w inner , you. No one else is fighting for the business b ecause either they don’t know ab out it, or they don’t know how.
3. Beat the Compet it ion vs. Make t he Compet it ion
Irr elevant : W hile Red Ocean strategy aims at combating the fier ce competition, Blue Ocean strategy aims at cr eating value pr oducts in a way to make competing in such an envir onment totally irr elevant.
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4. Exploit Exist ing Demand vs. Cr eat e and Capt ur e New Demand: In Red Ocean str ategy the total mar ket demand is divided amongst the competitor s . So a gain at one end will in tur n r esult in a loss of some other . W hile the Blue Ocean has no competition altogether ...it is a win -win situation for everyone.
5. Align t he or ganization w ith differ ent iat ion OR low
cost vs. aligning the or ganizat ion wit h differ ent iat ion AND low cost . : While Red Ocean strategy aims at aligning the whole system of a company’s activities with its str ategic choice of differ entiation or low cost, Blue Ocean gener ally aims at aligning the whole system of a com pany’s activities in pursuit of differ entiation and low cost
When the various supply side means/factors to captur e the mar ket fail, then the demand side factors become cr ucial. To cr eate new demand for the pr oduct by penetr ating the same mar ket thr ough var ious tools like pricing, pr omotion etc. incr eases demand but to a certain extent. Similar ly developing our pr oduct for the same mar ket incr eases the demand again to a certain extent. Like everything else ther e ar e limitations of the mar ket . Limitations of the finite. So the key is to explor e a new mar ket.
This new mar ket becomes even mor e cr ucial when our competitor s ar e not awar e about its existence. Consider ing this the aim must be to go beyond the finite into the unexplor ed, unfamiliar , uncultivated wor ld beyond.
To be a pioneer , a leader , a visionary one must br eakthr ough all the box walls and claim his uncontested position in the new wor ld. Innovative companies cr eate/discover a way to swim to these uncharted waters popular ly known as a "blue ocean," to pr ovide unique value for their customer s. They no longer have dir ect competition of the ‚Red ocean‛ and the gr owth potential is vast.
To achieve gr eat heights one must rise above the ster eotype. Homogeneity always r esults in average per formance. Competition mor e often than not limits the vision of the company; the actions of the company ar e decided by the actions of the r ivals. Pr ice war , pr omotion and advertising generally tur n the game nasty wher e the quest b ecomes ‚j ust to stay ahead of the other ‛. This makes a ‚me too‛ or ganization wher e b enchmar k is the per formance of the competitor . Or ganizations get caught in this viscous cir cle wher e they just keep w asting their efforts to b eat each other . They don’t even get an opportunity to look beyond the hor izons.
Sw immer s in the r ed ocean who ar e content to swim in their ocean can never get to know what advantages lie beyond. So to achieve the vast advantages of the ‚blue ocean‛ the or ganization must come out of its comfort zone (the familiar r ed ocean).
Customer is no wonder the king, but to assume that he is the only king in the w or ld is stupid. To depend on customers to achieve gr owth is not a very good idea, the aim should rather be to grab non – customers by cr eating new , uncontested opportunities and demand for the pr oduct.
Blue Ocean Strategy aims to make the competition irr elevant. It talks about value innovation which means to pr ovide the customers with enormous unexpected value along w ith differ entiation and low pr ice str ategies. W hen huge value addition is done, it automatically attr acts a differ ent class of customer s all together , thus cr eating new mar kets. So – no benchmar king, not being content in the r ed ocean and focus on those who ar e not using company’s pr oducts at all is the foundation of the blue ocean strategy. A small fr og in the w ell knows nothing about the ocean. Similar ly the or ganizations with myopic vision don’t know about the oppor tunities beyond horizon. They ar e too busy fighting the competition to r ealize the pow er of infinite. Their concern is j ust to exploit the existing demand. Value additions to the pr oduct /service if any is compensated by higher prices or by attracting r ival’s customer s. In short term, price wars ar e good for consumers, as they can take advantage of low er pr ices. Often they ar e not good for the companies involved. The low er prices r educe pr ofit mar gins and can thr eaten the survival of companies.
In the medium term, pr ice wars can be good for the dominant firms in the industry. The smaller , minor firms cannot compete and get shut down. The big dominant firms absorb the mar ket shar e of those which have exited. The r eal losers eventually ar e the tiny and small companies and their stakeholder s. Mor eover in the long term, the consumer may also be the suffer er s of the monopolistic state of the mar ket. When ther e ar e few er firms in the industry, pr ices tend to incr ease in the long r un. Pr ices may soar up to the levels which may be exploitative.
On the other hand the or ganizations which ar e visionar ies cr eate their own mar ket space w her e competition becomes irr elevant as ther e is just nobody to contest in this newly discover ed mar ket. Wher e value addition comes at higher price compensation in a r ed ocean, in blue ocean value additions ar e done at low prices to customers.
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"If ther e is a tr ait w hich does char acter ize leader s it is oppor tunism. Successful people ar e very often those w ho steadfastly r efuse to be daunted by disadvantage and have the ability to tur n disadvantage to good effect. They ar e people w ho seize oppor tunity and take r isks. Leader ship then seems to be a matter of per sonality and character ."
— John Viney
Dr ive
Blue Ocean strategy shifts the attention is on value
enhancement achieved through high-end pr oduct cr eation rather than on volume.
An example of the blue ocean strategy which led to all the local video stor es being shut was the Redbox which began in 2004, at 140 McDonald's r estaurants in Denver (U.S.A.). The company has set up self-ser vice vending kiosk with an inter active touch scr een like ATMs. It compr ises a r obotic disk arr ay system which contains a stock of DVDs. These kiosks ar e located indoor s or out and can hold mor e than
600 DVDs with 70–200 titles, updated w eekly. The
customers can use their cr edit car d or debit card to make
payment. These DVDs can be r etur ned the next day to any of the company's kiosks; r ental char ges accr ue up to 25 days, after which the customer b ecomes the owner of DVD (without the or iginal case) and r ental char ges cease to apply. W ith the use of the interactive scr een customer s can make choices for their favorite albums, movies etc. W ith the operational ease and easy availability these kiosks hav e b ecome very popular in U.S.A. At the supplier ’s end the issue of tr aditional br ick and mortar system w ith an expert r elationship management is done away with. No doubt the costs have come down and gr eater value is being pr ovided at easy and r easonable rates. For the alr eady established DVD outlets this has been a har d competition, almost a nightmar e.
"Even if you'r e on the r ight tr ack you'll get r un over if you j ust sit ther e."
— W ill Roger s
Tr akker Pvt Ltd. W hich is a Sattelite Vehicle
Tracking company in Pakistan, a j oint ventur e of Digicor e Technologies (South Africa) follow ed what is said above to become no.1 in their field. Tr akker pr ovides vehicle secur ity and Fleet management solution.TPL is No. 1 Sattellite vehicle tr acking company in Pakistan with mor e the 70% Mar ket Shar e. It sensed the need of the hour and intr oduced a simple pr oduct to track vehicles, with an idea to pr otect them against auto theft. This was an entir ely new pr oduct as no such pr oduct had existed befor e. Customers had no choice but to buy the pr oduct fr om the only company pr oviding the same i.e. Tr akkers. This made Trakker s a sole swimmer in the vast blue ocean. By the time competitor s could build up r esources to enter this domain, Trakker s became an undisputed King with almost thr ee fourth mar ket shar e.
"Success seems to be connected w ith action. Successful people keep moving. They make mistakes, but they don't quit."
— Conr ad Hilton
Hilton Hotels
In a similar glory story Agricultur e bank of China (ABC) intr oduced simple /quick loans & smart loans to simplify and shorten the business pr ocess ther eby incr ease efficiency. The instant r esult was an incr ease of 22.38% in its SME loans. W ith this ABC became a mar ket leader . So it is all about trying to r emove the pr edefined notions of the industry and thinking something radically differ ent.
Taking a cue fr om the success stories of the blue ocean
companies, the Gover nment of Malaysia is trying to
incorporate the same thr oughout the country…in all
domains.
Malaysian Pr ime minister , Datuk Seri Naj ib is r ecommending Blue Ocean str ategy to be applied in all gover nment agencies to achieve their economic agenda. Malaysia is w itnessing a turnar ound altogether w ith cr eativity at minimum cost. Some key developments that have taken place since 2009 under Government Transformation Plan (GTP) ar e:
(a) Cr eation of r ehabilitation camps for petty cr iminals r ather
than those high secur ity and high cost pr isons. These camps
permit mor e family interaction (daily), lear ning, wor k and saving. Of course this has put a positive impact on many lives. The agenda of r eforming the soul is better accomplished this way, wher e segr egation is done betw een ser ious cr iminals and petty cr iminals. This way petty criminal can be safeguarded fr om undesir ed consequences of the bad company of har d cor e cr iminals. No w onder this strategy is a success, cr ime rates in Malaysia have r educed
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by appr ox. 35%. Thanks to these initiatives mor e than 2000 pending crime cases wer e clear ed in a year .
(b) Under utilized Malaysian ar my tr aining centers w er e decided to be used to train policemen. Since army training
camps w er e better equipped than police tr aining camps, the training to policemen w er e of higher quality and raised standar ds. Mor eover it br ought about a sizable cost r eduction as separate camps w er e not r equir ed.
(c) Another inter esting step towar ds the blue ocean the
gover nment decided to optimize the land allotted to armed
for ces which was left vacant for agricultur al purpose.
(d) Government of Malaysia is also monitoring the pr imary
and secondary education of its citizen to develop it to
compete with the w or ld standar ds.
Apart fr om var ious other initiatives taken within the
ambit of gover nment agencies, government is trying to
initiate a cult to str engthen the country w ith a lot of innovations and value additions. This is sur e to be a landmar k proactive appr oach in global history.
Through this paper we aim to throw some pebbles in the stagnant minds where the thought process begins…so let the wings of creativity and imagination spread to conquer the world…
1. http://w isdomgr oup.com/r eport/make_your_competition_i rr elevant/
2. Heinz W eihr ich,Mar k V cannice,2010,Management,page
125
3. Koontz,1990,Esentials of management, 8e,Page 150
4. http://en.wikipedia.or g/wiki/Blue_Ocean_Strategy
5. Hollensen,2009,Global mar keting ,4e,Page 118
6. Barry J Witcher ,Vinh Sum Chau, 2010,Str ategic
Management: Pr inciples & Practice, Page 108
7. http://executive.education.insead.edu/blue_ocean_strategy
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