Sailing with Blue Ocean Strategy

A discussion in CiteHR

The Book, Blue Ocean Strategy: How to Create Uncontested Market Space and Make Competition Irrelevant’ was written by W. Chan Kim and Renée Mauborgne, two professors from INSEAD. Blue Ocean is referred as the untapped market requiring demand creation with highly profitable growth. This strategy creates uncontested market space, rejects competition by redefining service, Focus on non-customer , create and capture new demand , maximises the value return for the customer by minimising the cost, aligns the goals towards differentiation and lower costs . This theory presented a framework which ensure that as the value increases for the customer the cost of the product or service should decrease to a point where the coincides . The diagnostic tool have the range of factors in which the industry competes on horizontal axis. The offering level at which the buyer receives across the entire key competing factor on the vertical axis. The company’s relative performance across the industry factor for competition is represented by the graphic depiction of Value curve.

In order to understand the implementation, we take a look at how Air Deccan became an industry leader using this strategy. Air Deccan wrote history with what they implemented. To begin with, the tickets had several categories including value fliers, value flier plus, super flier and super flier plus. Air Deccan, priced the tickets as low as Rs 1 during the off-peak season and higher during the peak seasons.  The tickets were bundled for a family of four encouraging loyalty to the extent of offering flying for free. The concept was promoted through the R.K. Laxman’s Common Man. They further pioneered online ticket booking system to curb the travel agency cost to the customer. Furthermore the maintenance, repair and overhaul facility was targeted to set in India along with the BPO to support customer service. This was done to keep the maintenance cost low, internally. The four factors were Eliminate unnecessary services, reducing the ticket prices, creating more routes and raising the service efficiency through all sources including selling on tickets online. It reached beyond the three tier non-customer by targeting the common man for whom the airline service was way beyond the reach. The six path framework was followed by looking for alternative industries by targeting the customer travelling by train. Looking across the strategic groups but differentiating not just on service but on price. They looked across the chain of buyers by promoting the individual customer not just corporate. They looked across the complementary products and service offering through the online ticketing and selling ticket through the HPCL petrol pump kiosks and mobile van. This was done to target the direct customer. The company advertised R. K. Laxman’s Common Man thus looking across the functional or emotional appeal to the buyer. So far airlines used Maharaja and celebrities to promote the brand as premium. Finally looking across time was targeted by scaling the offering over a longer period of time.

There are other industry leaders who have reportedly implemented this strategy and benefitted by it .Blue Ocean Strategy implementation earned HCL a contract of 1500 Crore from DSG. They offered a package deal compared to Full time equivalent pricing. The employee first is another strategy which differentiates their service. . IPL, Twenty20 have been practicing this strategy.  They redefined cricket with reducing the span and add a lot more pace to the game . They infused the elements of entertainment, hence targeting the entire family and not just one sport lover. They launched cricket multiplexes, so that revenue is generated not just through the ticket sales at stadium and television rights but from other sources as well. The ‘Kar Lo Duniya Mutthi Mein’ offer by the reliance telecom was another successful implementation of this strategy. They launched a campaign of owning a mobile phone with a service at just Rs. 500. The concept was to replace the post card with a mobile phone call. Similarly IKEA, offered ready to assemble furniture’s. E-governance in India implemented Blue Ocean strategy, ICT creating Sanjeevni. Print Media targeted the literate people who had the financial capability to make a purchase yet did not buy a book or a newspaper. Tata Nano is another example of this strategy. The product converge industry at the production stage and targets an entirely new segment of buyer with quality offering.

The strategy holds counter view where it is argued that the anecdotes used in this strategy might not work for every business. The theory lacks necessary focus on marketing. It is assumed to be a part of the whole and what be a natural result through the adoption of the idea by the company. Furthermore the company may enter segment which have already been dominated by major players, at that point of time, even if there are differentiation created. it may change in Red Oceans strategy in the long run. For e.g. low cost mobile phone service. Low call rate would actually lead to every player offering the same value competing for the same customer.

Our aim remains to draw a reliable strategy which ensures the business profit through ethical manner. In Sun Tzu‘s word, To fight and conquer in all your battles is not the supreme excellence, supreme experience consist in breaking enemy’s resistance without fighting.

Comments are closed.