Blue Ocean Strategy: Create Uncontested Markets and Avoid Competition - Essay Sample

Introduction

The Blue Ocean Strategy is a strategic management idea developed by two professors, W. Chan Kim and Renee Mauborgne (2005). The initiative involves the creation of uncontested markets, thus eradicating unnecessary competition. In this form, business leaders are encouraged to pursue new markets rather than competing for existing markets. Unlike the bloody red markets which have a lot of businesspeople in the same industry, blue market strategies develop new ideas and target new markets. In the end, the business operates towards futuristic. Also, business people using this strategy ought to pursue high product differentiation means and cut down the costs of products, which significantly reduces foreign competition (Kim & Mauborgne, 2014). Other than lowering unhealthy competition, the blue ocean strategy hopes to ensure people in the industry achieve market fairness in situations where product supply exceeds product demand. As a result, the initiative will be more productive in the present and future of business activities.

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Practicing the blue ocean strategies requires a redefinition of competition terms, which implies moving towards the blue ocean where a business person has enough market that they don't see the need for unnecessary competition. Business success can be achieved in the blue sea if the four framework actions are considered. An analysis of factors worth raising above the industry standards is done, which is followed by a reduction of competition factors. Long-term competition factors are also identified and eliminated, and new elements are identified. For instance, Amazon has tried to imitate the Blue Ocean strategy practiced by its close competitors eBay and Apple (Kim & Mauborgne, 2014). Amazon failed, implying that identifying a blue ocean should be creative rather than imitation. Contrarily, Home-Depot went up the blue ocean shift and succeeded by offering what other companies like Amazon could not. Home-depot provides knowledge and advice to customers other than selling their products and services. It has since become a multi-billion company. Several businesses in the United States are struggling with unhealthy competition in an error where consumer tastes and preferences change, whereas companies continue to use similar strategies (Mauborgne & Kim, 2005). Kim advises that struggling businesses like Claire's, The Bon-Ton Stores, and Nine West must be creative enough to outdo the competition and move along consumer preferences for futuristic existence.

The Intensity of Competition according to Porter

Whereas Kim and Mauborgne encourage the use off the Blue Ocean strategy as a successful initiative, Michael Porter suggests the five forces of competition that are inclined to the red ocean strategy (Dobbs, 2016). According to Porter, success does not come by coincidence or luck as people want to believe, but by a critical analysis of the underlying economic forces. Porter suggests that success is achieved by creating strategies to counter competition in the existing industry (Porter, 2008). The competition goes far beyond other business dealers in the industry and also involves unseen participants like the suppliers, customers, potential entrants, and the product substitutes. The intensity of the five forces determines the profit returns of the industry, where tires and metal cans industries record minimal performances. In contrast, equipment and services record-high profits due to mild competition levels.

The threat of new may shake the industry if there are no barriers to entry, like in the perfect competition strategy. The stronger the obstacles, the lesser the threats posed to existing companies. Such restrictions include product differentiation, economies of scale, and capital requirements. However, even when new entrants are barred, the possibility of product substitution by existing companies is another force of competition (Porter, 2008). The bargaining power of customers also threatens existing businesses when one company, like Amazon, offers lower prices, unlike other companies like Wal-Mart, thus gaining more customers. The bargaining power of suppliers also shakes the industry when vendors ask for higher prices for their supplies as compared to what a seller will eventually issue to consumers (Dobbs, 2016). Lastly, jockeying a position in the industry and standing out is another force that businesses must analyze to forecast success.

Merits of Different Methods of Corporate Growth

Corporate growth involves organic or inorganic forms. Organic forms consist of the more profits received from consumer satisfaction. It entails more output, increased consumer base, and the achievement of new sales. Such factors form the internal development of the business, which is essential for business survival in a competitive market. Internal growth is crucial in identifying potential strengths and weaknesses in the organization and the factors that influence business success. Such factors include customers, competitors, suppliers, and business goals and objectives that shape the business's operation (Gupta, 2012). Take-overs involve leadership reorganization within the organization to achieve better corporate growth through strategies like influential and transformational governance.

Contrarily, acquisition and merges are forms of inorganic corporate growth. The procurement involves the purchase of new business while mergers involve the collaboration of two or more companies within the market to achieve a superior brand (Akinbuli & Kelilume, 2013). They are merging hopes to make more sales through the increase and combination of consumer base initially attached to either company. Acquisition hopes to achieve more sales by buying an already successful brand and acquiring its existing support and consumers (Lozano et al., 2016). The purchase is also referred to as franchising, whereas strategic alliances may be referred to as mergers. Therefore, both internal development, acquisition, mergers, and take-overs have the sole purpose of acquiring more sales through consumer base increase and satisfaction.

Differences between Strategic Change and Organizational Change

Currently, change is centralized in technology, where it is agreeable that some jobs have been done away with while the existing jobs continue to diminish in value. Therefore, organizational change implies on the structural changes that occur in the entire organization (Rosebaum, 2018). It may include changes in corporate culture and competitive strategies such as benchmarking. Organizational Change revolves around employee surveys, vision, strategy, customer surveys, business process re-engineering, just-in-time initiatives, empowerment and motivation strategy, total quality, and time-based strategies. Burnes (2004) describes organizational change through the planned or clinical approach in which development depends on the planned relationship between employees and the employer by encouraging teamwork approaches for business success. The second model of organizational change is the linear approach, which entails the step-by-step settings (Lin, 2012). Organizations forecast to change from the conception period, which is the establishment of a vision to the maturity stage that involves action or implementation.

Whereas organizational change entails the entire firm change, strategic change focuses on specific areas. Strategic Change occurs when managers realize that a particular strategy is no longer useful, and there is a need to change the plan. As a result, a vision is created for the future direction of the business. Action plans are determined to achieve the stated vision. The implementation stage involves putting the stated ideas or goals into action. Also, strategic change revolves around technology, organizational structure, and operational activities. Conversely, organizational change requires people management, which includes employees, customers, suppliers, and competitors as a whole (Ceulemans et al., 2015). Strategic management may consist of a shift from the red ocean strategy as described by Porter's five forces to the blue ocean strategy described by Kim and Mauborgne.

Human-Centered Change, as Portrayed by Beer and Nohria’s Theory E and O

Since the era of the industrial revolution, accepting change has been a significant problem for every organization. Traditional business companies have been forced to embrace change or die, whereas the recent ones also have their share of troubles. The change affects all organizations, including internet companies like Amazon and eBay. Turmoil arises when an organization tries to implement all the change recommendations available online. It leaves the organization in an operational mess, confusion, and a loss of resources and clients. Therefore, Beer and Nohria (2000) propose Theory E and Theory as a practical way of managing corporate change.

Theory E proposes change determined by the economic value of a company. The essence of this theory is to ensure that corporate success is measured by the shareholder value of the practical company (Beer & Nohria, 2000). The approach is considered as the hardest form of change in a business. The decisions made are tactical and affect significant stakeholders in the industry, including employees. The organization will be required to apply radical layoffs, substantial economic incentives, restructuring the firm, and downsizing. Theory E changes affect the employees as most are retrenched to achieve the economic value of the business. Thus, theory E is not centered on the welfare of the human factor in the firm but the amount of the organization. Theory E is commonly applied by U.S based companies, including Amazon and eBay.

Conversely, Theory O is organization based and is considered as a flexible approach. The approach is used to restructure the culture of an organization such that no majority group is affected by the changes. The theory is centered on protecting the human rights of both employees and consumers (Beer & Nohria, 2000). The approach is based on long-term psychological and organizational learning with employees to embrace ongoing changes for the success of the business. Such strategies include reflection, feedback acquisition, cultural development, and reflection.

The Role of Mission and Vision in Organizational Change

People tend to react to situations depending on their beliefs. For instance, in a case where a child is dying, and the job can only be saved by taking the child to the hospitals, either parent will react differently depending on beliefs. A religious mother believes that the condition will be healed by prayer, whereas the father, who works as a doctor, insists on hospitalization. It is a typical case of conflict of ideas that may occur in an organizational setup. For instance, a manager may believe that dealing with competition from Porter's perspective is the best way to forecast change and success for a business (Porter, 2008). Contrarily, other managers will argue with Kim and Mauborgne's idea of pursuing uncongested markets using the blue ocean approach (Kim & Mauborgne, 2014). In both cases, every manager argues based on their beliefs and the goals they set for the organization.

Effective change management requires that an organization aligns its cultural beliefs and values to match the vision and mission statement. Managers must make the organization's values known to the stakeholders and to the public to attract, retain, and obtain revenue. Mission and vision statements work as guiding principles for employees in the organization (Calder, 2014). A mission statement provides the firm with the opportunity to evaluate market niches,...