If we think of the market as an ocean
and all the competing organisations as sharks fighting against each other and
striving to survive, then naturally the bloodshed will make the ocean turn red.
This is the primary reason for calling the competing strategies adopted by
organisations as Red Ocean Strategies.
Red oceans represents the known market space – all the industries that are in existence
today. The industry boundaries are well defined and accepted, and the players
understand the competitive rules of the game very well. Herein, the companies
try to surpass their rivals in order to capture a greater share of existing
demand. But the prospects for growth and profits gets reduced as the space gets
more and more crowded. Products becomes commodities, and rising competition
turns the water bloody.
However, prospects in already
established market spaces – red oceans are narrowing down very steadily. Due to
globalisation and technological advances, industrial productivity have
substantially improved. Also, niche markets and monopoly havens are continuing
to disappear with the fall in trade barriers between nations and global
availability of information on products and prices (Ohmae, 1990). At the same
time there is little evidence to support any increase in demand, at least in
developed nations. This has resulted in a situation of supply overtaking
demand. Thus, traditional competitive-based strategies while necessary, are not
sufficient to sustain high performance (Kim and Mauborgne, 2005). In order to
achieve superior profitability and grab growth opportunities, companies are
required to establish blue oceans.
Blue Ocean represents
the unknown market space – all the industries that are not in existence today.
Demand is created rather than fought over. Competition is irrelevant and there
is ample opportunity for profitable and rapid growth. Blue oceans can be
created in two ways. Sometimes, companies can give rise to completely new
industries. But mostly, a company alters the boundaries of an existing industry
and thus creates a blue ocean from within a red ocean.
The strategic moves that leads to
creation of blue oceans show several common characteristics. Blue oceans are
seldom the result of technological innovation per se but results from linking
already existing technology to what buyers value. And this is true even for
industries that are technology intensive. The view that blue oceans can be
created by only new entrants has often been challenged. In fact, it has been
seen that most blue oceans are created by incumbents and that too usually
within their core businesses. Creation of blue oceans leads to building of powerful
brands that lasts for decades. Kim and Mauborgne found that creators of blue
oceans never use competition as a benchmark. Instead, they make it irrelevant
by breaking the cost/value trade-off. Successful companies pursue low cost and
product differentiation simultaneously. Cost savings come from reducing and
eliminating the factors that an industry competes on. And value addition
results from raising elements that the industry has never offered.
Blue ocean strategy creates economic
as well as cognitive barriers to imitations and thus enables the companies to
reap the benefits for a long period of time without any credible challenges.
This happens because blue ocean creators attract customers in huge numbers
which enables them to generate economies of scale and thus put would-be
imitators at a significant cost advantage. Also, imitating a whole system of
activities is not an easy task. At times, when a company offers a jump in
value, it earns a loyal following and a brand buzz in the marketplace. In such
situations, the imitator may find difficulty in unseating the blue ocean
creator or may find it conflicting with their existing brand image.
Just as Blue Ocean
Strategy claims that a Red Ocean Strategy does not guarantee success for a
firm, a Purple Ocean Strategy states
that Blue Ocean Strategy may not promise business success in the long-run since
Blue Ocean will turn red ultimately. Both red oceans and blue oceans have
co-existed always. Purple Oceans are formed wherever these two overlap. Cavagnetto
and Gahir (2013) argued that there are no permanent Blue Oceans in reality. The
Blue oceans turn red whenever competitors begin to innovate past the blue ocean
creator, or imitate them or capture a niche in the new market. When markets
become completely Red Oceans, players will choose to exit due to intense
competition and lower profitability. Therefore, it is seen that players are
situated somewhere in the middle of Red and Blue oceans – The Purple Oceans. The
Purple Ocean Strategy believes that a firm requires both innovative ideas as
well as a range of strategies to compete with rivalry and remain functional.
Thus, by adopting both the strategies
concurrently, we achieved a new type of strategy i.e., purple strategy which is
the fusion and combination of both the red and blue ocean strategy. It act as
the new colour of the business for an exciting new future for business.
However, as can be seen that all these
strategies tend to give results in a long span of time. What about those
situations where a firm is faced with a very high intensity problem that needs
to be dealt with very quickly in a very short period. The relief comes from Black
Ocean Strategy. As the name itself suggests, black ocean strategy
involves some kind of black magic that enables an organisation to foresee
problems well in advance and solve them successfully to continue to survive in
its business market. Aithal and Kumar (2015) developed this concept systematically
based on their observation and focussed group study and also they also studied the
characteristics and conditions of this model of decision making.
Organisations that have the objective
of quick progression without much of ethical bothering, or environmental
bothering and those which are impacted by some sort of sustainability dangers
due to economic, social, political or environmental issues are more likely to
use Black Ocean Strategy. Also, firms that face problems in starting a business
due to volatility in socio-environmental conditions, or adverse impacts of laws
of the land, corrupt government officials & bureaucratic sanctions, unethical
tendency of stakeholders, and other such reasons follow this type of strategy
in order to survive. Those organisations which are already set-up and wants to
establish its presence in the marketplace quickly by inorganic means taking
over other existing competitors are also prone to use a Black Ocean Strategy.
All such organisations rely on the use of influence, or bribery, or other such
means to achieve their short term objectives like gaining monopoly rights,
fooling shareholders or government in terms of profit sharing, to get certain
approvals from the law of land, availing tax benefits etc.