Wednesday, September 12, 2007

Blue Ocean Strategy - how long it can work ?

W. Chan Kim and Renee Mauborgne argue in their book “Blue Ocean Strategy” that tomorrow’s leading companies will succeed not by battling competitors, but by creating “blue oceans” of uncontested market space ripe for growth.
There are lot of reviews written on it by different Management Gurus, highlighting the pros and cons of the strategy. I have tried to analyze some of the questions which came to my mind on reading about the “Blue Ocean Strategy”.
First point, that comes to my mind that how to find an uncontested market, especially in the information rich globalised world where the information and competition is spreading very fast.
True, there are many uncontested market; let’s take an example of the Indian IT companies.
I was reading few months back in Economic Times, that the total IT market size of Europe is around 800 Billion $ , and most of the market is unconquered in terms of IT implementation. All, the Indian IT companies have majority of pie coming from US (more than 50 % for all the Indian IT companies) , and I was also reading that almost all the big IT companies are looking for Europe as their next destination with growing Rupee Appreciation against Dollar and the recent sub-prime crisis and fear of a slowdown in US economy.
Well, how does a company find an uncontested market is the biggest concern, because an uncontested market will always be attractive and this will make it competitive?
A positive point which comes in my mind regarding going for an uncontested market is the first mover advantage. A company for example, Satyam finds an opportunity in an East African country and is the first one to set up its shop there. The country’s economic landscape is low on the Business Confidence Index, and most of the capitalists don’t find it an attractive destination.
Satyam develops the infrastructure there, and starts getting return on its investment. The other companies will soon to be following in, and the advantage of “Blue Ocean Strategy” will fade away.
But, definitely Satyam can have a “first mover advantage” in terms of market penetration. But, with the innovation being copied easily, the lifecycle of first mover advantage has reduced in recent times.
So, I feel that there can be many issues for having a successful “Blue Ocean Strategy” in implementation, but theoretically its one of the best strategy which has come up in recent times. Not completely rejecting the theory, I also feel that it can be used as an advantage by the company with proper planning and execution by creating a high degree of “Brand Value” in the “Blue Ocean” to retain its first mover advantage.

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