The competition between companies is increasingly strong, when a company targets a certain market which already has several suppliers, it will not generate new customers, it will simply prey on the customers of its competitors, the more entities there are in the market, this "fight" will be increasingly aggressive.
smes-ocean-azul-lourdesThe previous ones are called red oceans, they have characteristics and business design with very defined characteristics, on the other hand there is the concept of blue ocean that are markets that are not dressed in competition which are waiting for profitable businesses.
It is an indisputable reality that every species will have to adapt to change to achieve survival, the same happens in the area of companies, they must put aside the reliable formulas to carry out business, jump from the already very competitive red oceans towards the little explored blue oceans.
Speaking of business growth or development, SMEs pose greater challenges to lead the company towards better horizons or markets, however, the concept of blue oceans may bring them closer to the objective of comprehensive development by creating new market segments, making innovations, but above all moving away from over-exploited market that generates profit.
DEFINITION OF RED AND BLUE OCEANS
RED OCEAN
To have a clear idea of what is referred to when we talk about red oceans, it will be defined as a market sector, where there are many companies that offer their product with similar characteristics.
To sell these products, sales tactics or marketing strategies will be implemented, the innovation teams will find themselves working hard trying to differentiate the product, making it faster, prettier, smaller, bigger, more functional., etc., there are thousands of possibilities, each company will try to make a better and better product so that customers favor them with their choice.
However, during this process they also need to lower costs, to remain an attractive purchase option, which can lead to economic losses for organizations.
This process is observed since the offer of the very diverse providers exceeds the demand of the consumers, this process of competition or rivalry has four types of levels:
- Low competitive rivalry: The demand is not 100% attended by the suppliers, which indicates that they are at a level of comfort, the products between competitors are not yet standardized, the customer may find notable differences between them, the tactics of sales are passive Controlled rivalry: Suppliers have stronger sales tactics, in order to achieve broader market coverage, products are still with notable differences between them Competitive rivalry on the rise: Products begin to standardize, suppliers show warlike sales tactics to cover a larger market segment in a smaller amount of time Destructive rivalry: oversaturation of suppliers, exceeding the amount of demand,aggressive actions or sales techniques in the hope of winning customers from the competition, no company intends to work in these types of markets with destructive rivalries due to the reduction of the interests of the same.
Red oceans are a fundamental part of the successful formulas of well-known companies, and it is very important that a company knows how to conduct itself in them, however, the need to direct its gaze towards new market sectors is imperative, in order to guarantee permanence of companies.
BLUE OCEAN
In a blue ocean, suppliers seek to create a demand for a market that does not yet exist, based on restructuring the borders of markets that are already in operation.
In these types of markets, competition is practically nil, so the products have differentiation, the business capacities are expanded, so the profits tend to be high.
Companies located in this type of oceans are focused on making products that have new uses, that satisfy needs that the customer does not yet know, and when they have discovered them, they become a captive customer, in this way the demand will increase, therefore, profits and sales of the company.
When a new product goes on the market, it maintains what is known as a Premium price, that is, a high price that the supplier imposes on its product based on the quality and qualities of the new product, if the supplier reinvests these dividends obtained, it strengthens the cycle Premium price.
Chan and Mauborgne carried out an analysis of 108 new companies, of which only 14% of them present traits of belonging to the blue ocean, from this small group income that amounted to 38% and 61% of total dividends was recorded (Chan, Mauborgne, 2005).
It can be considered that a company can navigate in the blue ocean without any competition for a period of 10 to 15 years, because after this time competitors may emerge.
The key to the permanence of a company in these oceans is in the type and quantity of innovation that it handles, however, the firm growth of a company is usually beneficial only at the beginning, later the characteristics of innovation will decrease.
When new suppliers begin to be added to a blue ocean, it is time to start the conception of a new one
HOW TO CREATE A BLUE OCEAN?
Administrative decisions are a fundamental part of the evaluation of companies, through the "strategic movement" of them.
Innovation is the basis for the birth of a blue ocean, leading to the creation of new markets in which there is no competition or demand, which ends the cost-value ratio
For Chan and Mauborgne the creation of a blue ocean must be carried out 4 steps or principles
- Reconstruct market frontiers: this point does not attempt to analyze or project the behavior of the markets, it simply seeks to expand the existing limits, for which it relies on five ways: Explore alternative sectors: Initially, which ones will have to be identified with the sectors or suppliers that handle products or services that cover the same needs as those offered by the company, subsequently the reason why end consumers choose these alternative options will be determined and thus try to provide a completely new product.Explore different strategies in each sector: Each organization bases its tactics on the cost and profits that it can generate,But suppliers can move to a blue ocean of an already defined item trying to assimilate which are the key characteristics that make a consumer make a purchase decision.Explore the chain of buyers: Very frequently companies direct all their tactics of sale to certain consumer sectors, previously identified as direct buyers, but in many cases this analysis is based on custom or on facts that are simply not proven, if a careful analysis of potential buyers is carried out, creation of a blue ocean Explore complementary products and services: When developing a product that will be offered, the analysis of the characteristics of possible sales after the marketing of an original product should be included,that is, maintenance, repair, accessories, if these possibilities are considered at the time of manufacture, the differentiation will increase and the blue ocean will be created.Explore the functional or emotional appeal for buyers: To create a blue ocean through this route, a objective approach regarding the product offered, if it has as an essential part functional characteristics such as the use of shoes, belts, the part that creates an emotional attachment on the part of the consumer should be sought, for example variants referring to fashion styles, and vice versa if the product It is simply emotional, locating a functional variant. Focus on the big idea, not numbers: A business approach in general is focused on reducing manufacturing costs or increasing sales,They are usually focused on a single department, or several, but independently, that is, the strategies may seem to work independently, but overall they do not help the company to obtain the desired results.
A general outline of the objectives of the company will have to be made to later break down in more detail how those objectives will be achieved, there is a methodology that will help in the preparation of said outline.
- Visual awakening: A sketch of the current situation of the company is made, placing the characteristics that make it competitive, and then one of the suppliers that mean the closest competition is made Visual exploration: The top management of the company at this stage must perform a list of the characteristics of the company that may undergo any alteration, including that they may be eliminated or added in order to make the product offered more competitive, this stage will have to be carried out directly by senior management without delegating responsibilities because in many Sometimes the people to whom this activity is delegated do not have full knowledge of the product or the market to which they are directed.After the management carries out the analysis of the characteristics that the product will have, the sales tactic was redesigned and a consensus was carried out with the most demanding buyers currently available and with the buyers of the closest competition, will perform a display of the new features to verify whether or not they are functional and pleasant, from this consensus new modifications may arise Visual communication: At this moment you have the outline of the company's reality and a clear idea of where It must be addressed, in the same way it has the reference of suppliers with close competence to us. The elaboration of this sketch is not the only element that should be taken into account in the elaboration of strategic tactics,Financial figures and analysis should be added but based on a central idea that is the sketch made Go beyond existing demand: A company used to swimming in red oceans focuses all its attention and technology on pleasing its buyers, polishing more and more your product to achieve customization, but this is leading to making the market to which your product is directed in an increasingly smaller one, the ideal strategy to go from a red ocean to a blue will be to analyze non-buyers, who can provide very viable ideas regarding the characteristics they seek from a product.A company accustomed to swimming in red oceans focuses all its attention and technology on pleasing its buyers, increasingly polishing its product to achieve customization, but this is leading to making the market to which its product is directed into one that is smaller and smaller., the ideal strategy to go from a red ocean to a blue one will be to analyze non-buyers, who can provide very viable ideas regarding the characteristics they seek from a product.A company accustomed to swimming in red oceans focuses all its attention and technology on pleasing its buyers, increasingly polishing its product to achieve customization, but this is leading to making the market to which its product is directed into one that is smaller and smaller., the ideal strategy to go from a red ocean to a blue one will be to analyze non-buyers, who can provide very viable ideas regarding the characteristics they seek from a product.that can provide very viable ideas regarding the characteristics they seek from a product.that can provide very viable ideas regarding the characteristics they seek from a product.
Potential non-buyers are those who consume quantities of products similar to ours that are offered by a nearby supplier, and there are also high-level non-buyers that mean markets that have not been potentialized to introduce the product offered, these represent the largest quantity and therefore the largest business project. Low-level non-buyers are those who do not buy the product because it is out of their economic reach, so trying to enter this market segment can be very lucrative.
- Ensure the commercial viability of the blue ocean: Once the blue ocean to which the company wants to move has been identified, it is necessary to carry out certain validations to minimize the risk, for example: Will buyers have greater utility derived from the modifications made to the product? Is the sale price accessible to buyers? Are the manufacturing costs acceptable? Are there significant impediments to making such modifications?
Technological innovation does not always result in buyer satisfaction, in many cases it is so sophisticated that buyers do not know how it works and do not exploit its potential, innovation to be functional should make the buyer's life more comfortable, entertaining and profitable, taking care at all times to eliminate or decrease barriers that stop non-buyers from approaching the product.
THE RIGHT PRICE
When the product offered has a unique characteristic and maintains an adequate price, it is highly unlikely that the competition will intend to do something similar.
At the beginning, the prices that the competition manages for products similar to those that we will offer in our blue ocean must be equated, without forgetting those products that do not have the same characteristics but that satisfy the same needs as our product, when the price range is found. has the largest number of buyers, you already have a basis for what will be the ideal price for the company.
If the new product to be offered has characteristics that cannot be easily matched by competition due to any circumstance (patents, characteristics of the assets, etc.), the price to be established will be higher.
On the other hand, the fixed price should be considered as medium or low if it has any of these characteristics:
It can be easily matched.
- Mass production costs are low, so it is necessary to attract the largest number of buyers to further reduce the cost. The product tends to be more attractive the more people consume or buy it.
ORGANIZATIONAL LIMITATIONS
When the tactic for the creation of a blue ocean is defined it is time to start it, unfortunately there will be at least four limitations in the realization of the conceived tactics
First limiting perception: raising awareness among employees of the need to change the ocean, because red, although it keeps them in a comfort zone, will not have a profitable future reserved for the company.
Second limitation limited resources: It can be assumed that when the changes to be made are very large the costs will also be, but in most situations this is not the case.
Third limiting motivation: Modifying a business style, or a process is extremely difficult, when we run into resistance to change from most of the elementary participants, to carry out the process it is necessary to abandon the preconceived paradigms in the development of tactics to start implementing the change.
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