2. Literature Review
2.1 Blue Ocean Strategy Related Literature
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2. Literature Review
2.1 Blue Ocean Strategy Related Literature
Until now there are still very few studies on the Blue Ocean Strategy concept. The serious ones include papers on Blue Ocean Strategy (Kim and Mauborgne 1997, 2005), and the work (Burke, Stel van and Thurik 2008), where the authors checked the credibility of the Blue Ocean concept.
1) Kim and Mauborgne (2005). Blue Ocean Strategy.
[Research Themes]
This book proposes the analytical tools and frameworks to open up new uncontested markets for an organization, and ignore the existing competition in its present industry, respectively. The four principles of the Blue Ocean Strategy are: 1) creating uncontested market space by reconstructing market boundaries, 2)focusing on the big picture, 3)reaching beyond existing demand and 4) getting the strategic sequence right.
These principles are used when trying to remake the conventional market boundaries (six paths).
The planning risk of the new strategies can be reduced by following the four steps of 1) visualizing strategy, 2) getting access to the three tiers of noncustomers and 3) aligning new remarkable utility of the offering with strategic pricing, target costing and by overcoming adoption hurdles.
[Implication of the Research]
In the book a lot of examples across different industries are presented that may help business people open up new markets in their own fields. More than that, the book helps establish new strategic thinking to do so. Also, the book presents the four key organizational hurdles that usually don’t allow a company’s strategy to be implemented. These obstacles are the cognitive hurdle (an organization is wedded to the status quo), the political hurdle (coming across the opposition from powerful vested interests), the motivational hurdle (inability to motivate the staff), and the resources
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hurdle (lack of necessary resources to introduce the change). The authors of the book introduce practical guidelines to overcome these hurdles in an organization based on real life examples.
2) Burke, Stel van and Thurik (2008). Blue Ocean versus Competitive Strategy: Theory and Evidence.
[Research Themes]
This paper tests the Blue Ocean Strategy for credibility. It compares the traditional competitive strategy to Blue Ocean, and asks whether more firms means more competition, or, as Blue Ocean argues, competition is irrelevant because as more firms engage in value innovation they will generate a larger pool of profits across an entire industry. The other question of the study is, whether the effects of strategies are different in the short- and long term periods.
[Research methods]
This paper introduces a new methodology to test the dominance of the Blue Ocean Strategy over general competitive strategies in short- and long-term periods. Statistical analysis is used to answer whether the Blue Ocean Strategy can be used as a generic strategy.
[Research data]
The analysis is based on the Dutch retail industry- 41 shop types, 655 observations- between 1982 and 2000 years. It is believed that all of the components of Blue Ocean Strategy- value innovation, demand creation, market potential- existed in the Dutch market during that time period.
[Research Results]
The results of the aforementioned study do not support the hypothesis that the retailers use blue ocean to the point of making competition irrelevant. Nevertheless, for the firms that adopt the Blue Ocean Strategy, the researchers found a positive long term relation between the number of firms and average profit levels.
[Implication of the Research]
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According to the results of the study, the short- and long-term periods have opposite effects for the competitive and blue ocean strategies. Thus managers can implement an inter-temporal strategic blend of blue ocean and competitive strategy. It means that a firm in a “red ocean” now, will still need to manage the competition in the short term, so that it could survive while achieving the longer term blue ocean goal.
3) Kim and Mauborgne (1997). Value Innovation: The Strategic Logic of High Growth.
Harvard Business Review.
[Research Themes]
The paper looks at why some companies achieve sustained high growth in both revenues and profits, and why the others fail to do so. This paper can be considered a predecessor of the Blue Ocean Strategy book. Here the value innovation is also researched.
[Research Samples]
The paper is based on the examination of 30 companies around the world in about 30 industries. Companies with high growing revenues and profits as well as unsuccessful companies were researched. The method of research was qualitative: managers, analysts, and researchers from those companies were interviewed.
[Research Results]
The result of the research showed that the reason of success or failure of the companies was due to the way of thinking about the strategy. The managers of the high-growth companies described their way of doing business as what the authors later called the “logic of value innovation”. The managers of the second group of companies all thought in a conventional way about strategies.
[Research Implications]
Most significantly, the research results supplement the Blue Ocean book with its classification of “the three platforms”, on which value innovation can take place: product, service,
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and delivery. The most successful companies at repeating value innovation were the ones that took advantage of all the three platforms. Thus, they could stretch the value innovation cycle over time.