In today's competitive world, organizations seek to excel in quality, efficiency and price to increasingly increase their market share; and for this, they use various strategies that include, for example, the horizontal or vertical integration of the value chain, the modification of processes and products in search of differentiation, the application of marketing and development of activities for customer loyalty, among many other tools and strategies that provide great benefits in that tenor.
However, this arduous competition for the sustainability of the company and the differentiation over its competitors, implies a constant battle between the participating companies of the line or sector, for preference and permanence in the market, that is, the organizations generate action plans and strategies in search of conquering a certain territory. But… Why are new territories not visualized? Why not seek the conquest of new horizons, instead of facing battles for those who are already highly competitive?
The truth is that facing new searches and new paths and horizons requires innovative strategies, implies creativity and a systemic vision, in addition to the use of all the resources of the organization, since their exploitation plays an extremely important role in facing the challenges that until a certain moment are unknown.
Thus, in recent years, traditional companies have focused their attention on beating the competition, however, as more competitors appear to develop in the market under this scheme, the products or services that are offered are standardized, and therefore, the possibilities of profit, development and growth diminish for the organization. Being precisely this competition in the so-called red oceans, the inspiration for the publication "The Art of War" by Sun Tzu, whose objective in history was to destroy the enemy with all possible and necessary means.
What is a red ocean?
When referring to the universe of organizations that exist in the market, the red ocean is represented precisely by all of these companies.
Therefore, in the red oceans, although the rules of competition are presumed defined and understood, the truth is that organizations put into play all their efforts to overcome their rivals, in order to seize most of the demand Present. Thus, the strategy of
Traditional red ocean, implies competing in an existing market, challenging the competition and adopting various strategies of cost reduction, differentiated quality, total customer satisfaction, among others, to occupy an important position in the market. (Chan & Mauborgne, 2005)
In short, in the red oceans competition is voracious and its incursion is limited by the delivery of low prices and added value, as well as by the life cycle of the product or service offered. (Castellanos, 2015) Since, while a greater number of suppliers appear for said demand, the profit and growth perspectives for the organization are reduced, competition becomes very complicated and the organization therefore tends to act reactively accordingly. In this way, the opportunities to achieve a winning strategy diminish as the number of competitors increases and commercial efforts are directed to highlight the differences with respect to the rest of the alternatives. (Urdiz, 2013)
However, most companies tend to foray and proliferate around familiar markets and products, because although they are condemned to an incessant war for competitiveness in the long run, they take much less risk than being a pioneer implies.
Meanwhile, as stipulated (Rezk, 2016), the companies that are created and go to the red oceans, always aim to extract the highest possible profitability from a position of power, before increasingly dependent suppliers, competitors and customers of the goods that are produced. They negotiate fiercely and subdue the opponent with the sole objective of generating positive financial results for the organization.
Blue ocean strategy
The “blue ocean” strategy, proposed by authors W. Chan Kim and Reneé Mauorgne, abandons the destructive and “bloody” competition generated by the red oceans, to broaden market horizons and generate value through innovation. This strategy is based on the premise that the only way to beat the competition is to stop focusing all the resources and efforts of the organization to beat it, that is, for companies that immerse themselves in the blue ocean strategy, the Competition is considered irrelevant, since the rules of the game in the new horizons and territories to be explored are waiting to be established. (Chan & Mauborgne, 2005)
This philosophy is characterized by the creation of markets in areas that are not exploited, and that could provide opportunities for profitable and sustained growth for an organization. In this way, although the incursion into certain blue oceans is not related to the initial or current turn of a company, most initiatives arise from the red oceans, seeking the expansion of existing business limits.
The red ocean or known ideas, products, services, and spaces, as they are flooded with competitors, the profit diminishes, and in that sense, the dispute for leadership and survival becomes fierce. Therefore, in this scenario, organizations must be proactive and constantly search for new "oceans" or opportunities; Thus, if the company develops under this philosophy of permanent innovation, it will be able to enter into unexplored or exploited business areas; where you don't struggle to survive but you grow freely and quickly. (Advanced Network Consulting, sf)
Likewise, perhaps the most important characteristic of the blue ocean strategy is that the conventional principle of relation between the value provided and the cost of a product or service is rejected, since the traditional strategy of introduction to the market implies a choice between the differentiation and low cost. However, as far as innovation strategies are concerned, the evidence shows that successful companies that have adopted this ideology have on several occasions managed to achieve differentiation and low cost simultaneously.
In this sense, in a blue ocean, cost savings are achieved with the elimination or reduction of competition factors, while the value for the buyer rises through the creation and offer of products and services that the industry has never offered.. Therefore, this strategy creates considerable economic and know-how barriers, which can hardly be quickly imitated. (San Vicente, 2015)
On the other hand, at present, it is possible to perceive that those companies with greater economic growth and market positioning have given little relevance to their competitors, since they have focused on innovating and creating value for their consumers. In this way, in blue oceans, demand is created rather than competing for it, providing the possibility of finding sustainable growth opportunities. (San Vicente, 2015)
Innovate to create value for the organization
Implementing a blue ocean strategy involves an in-depth analysis exercise to identify the variables that must be modified or adopted in the organization's structure, to then focus solely on the development of these variables.
Likewise, it is essential that the pillars of development of the strategy to be implemented are perceived as totally divergent from those that can be found in the market, that is, there must be a clear difference between what is currently offered and what the organization will offer. (blue ocean). However, it is also valid to create and invent new variables within an established industry or sector, or even include variables from other industries to be considered in the sector in which they compete. Such is the case of Cirque du Soleil, which innovated with the creation of a new concept of entertainment by taking elements from both the theater and the circus,mixing them and transforming the traditional circus into a new form of refined entertainment that has so far been very successful and that undoubtedly enjoys an ocean without competition. (Enrique, 2011)
Faced with such evidence, organizations that decide to enter new markets by carrying out the blue ocean strategy must consider and apply the following four principles (Advanced Network Consulting, nd):
Creating new consumer spaces: Finding blue oceans is not about randomly predicting industry trends, nor is it about trial and error. Rather, a structured process must be put in place that can push the boundaries of today's market. And for this, in this case, the use of surveillance and technological prospecting, as well as techniques that exploit creativity and innovation, are key.
Focusing on the global idea and not on the numbers: Once the blue ocean has been located and the mechanisms to reach it have been defined, the next step is to define the transformative strategies within the organization, which are considered essential to be able to venture into the set stage.
Currently, most organizations only define strategies to compete in current existing markets (red oceans), generating numerical forecasts and rarely including innovative aspects. Therefore, under the blue ocean strategy, including innovation as part of the business strategy is of vital importance.
Go beyond existing demand: No company regularly wants to venture beyond the red oceans; And to counteract this effect, two common strategic practices should be avoided:
- Focusing solely on meeting the needs of current customers Over-segmenting markets
In this case, the more intense the competition, the more emphasis organizations place on customizing the offer of products and services. However, when companies compete to conquer customer preferences through excessive segmentation, they run the risk of creating too narrow target markets. Therefore, to maximize the size of the blue oceans, companies must direct their efforts towards potential customers, rather than focusing on existing customers.
Ensuring the commercial viability of the blue ocean: Finally, the stipulated strategy must be validated, to ensure its commercial viability, in order to reduce the intrinsic risk involved in the implementation of a blue ocean strategy.
In order to do this, an affirmative answer must be found to the following questions: Will the clients obtain exceptional utility from the new business idea? Is the stipulated price for the new products or services available to the great mass of potential clients?,
Are there obstacles to transforming the value proposition?
In this regard, the proposal must be analyzed and valued using financial indicators, projected cash flows, calculation of the net present value, generation of sales growth forecasts, study of the internal rate of return, among other indicators that allow to verify the viability of the strategy. (Advanced Network Consulting, sf)
Likewise, some of the tools proposed by (Chan & Mauborgne, 2005) to begin the application of the blue ocean strategy are mentioned below.
Strategic Framework : First, the current variables in which the organization invests to win market are identified, and later, those that are used by the entire competition are collected, in order to visualize the investment applied to each of the variables of the industry, resulting in a value curve, which represents the company's performance against the benchmark values of the competition, as shown in Figure 4.
Figure 4. Example of value curve
Scheme of the four actions: Starting from the value curve carried out, a new curve is established that allows the organization to stand out from the rest, identifying a blue ocean through 4 concepts:
Eliminate - What existing variables in the sector should be eliminated and not continue working on them?
Reduce - What variables could reduce your investment below the companies that make up the sector?
Increase - What variables should increase your investment or the resources applied, above the companies in the sector?
Create - What variables should be brought to market
Figure 5. Scheme of the four actions for the identification of blue oceans because they do not yet exist or have not been applied by the industry or sector to which it belongs? (Gómez, 2013)
However, after the implementation of a blue ocean strategy, these "waters" may turn red over time, as the rest of the companies will surely be attracted by the new opportunities that the new discovered market implies; and for this reason, innovation has to be permanent.
Emerald Oceans
But… Where are those already in the blue oceans sailing? Well, this is the foundation of the emerald oceans, which practically refers to marketing applied in the 21st century.
As noted, while classical theory implies voracious competition that generates “red oceans”, W. Chan Kim and Renée Mauborgne stipulated a philosophy called “blue oceans”, which invites us to consider competition irrelevant and to give greater importance to innovation, modifying the current value curve of an organization, in relation to the value curve of the industry or sector to which it belongs, where multiple tools and strategies come into play to increase the company's income, while managing to reduce costs. (Chan & Mauborgne, 2005)
Likewise, the blue oceans strategy is based on the idea that in order to achieve sustainability, organizations must rebuild their value model in response to demand and not supply, since the market structure and boundaries do not exist in consumers, but in the proposals that companies issue to the market.
However, there is also an ocean that goes beyond the traditional and the innovation initiative; the "emerald oceans" that represent a superior vision that not only seeks to "do business" that benefits the organization, but also, to undertake business in a more sensitive way, knowing that there is a consumer who deserves to be understood. (Rezk, 2016)
And considering this assumption, the more organizations know and learn about all the aspects that interact and govern the behavior of their public, they will be in a better position to understand what type of products to manufacture, produce or launch on the market, and through what stimuli They must be presented to consumers, in order to achieve responses that guarantee a friendly and sustainable relationship.
As expressed (Fernández, 2013), the emerald ocean implies creating goods and services, where social conscience encourages organizations to satisfy the true needs of human beings, and where the sense of ethics marks the balance that must exist between the growth of the company and the value received by consumers, communicated through responsible marketing.
In this way, the true purpose of the emerald oceans is to generate value for all parties that intervene in the production and consumption processes, improving the quality of life of people, using only the means that collaborate to generate benefits to society, and focused on creating a better world. (Fernández, 2015)
conclusion
In recent decades, a radical change has arisen in the business and management models of organizations, since, as is well known, currently the correct use of information and communication technologies, knowledge management and innovation are considered critical factors. for the development and success of companies. Likewise, the voracious competition in the market has forced organizations to develop advantages that allow them to obtain participation and opportunities through differentiation. However, although innovation is a relevant term for these purposes, the reality is that very few organizations actually put it into practice.
Meanwhile, constant work on innovation will allow organizations to develop creativity to find mechanisms that enable it to anticipate and dispense widely from the competition, and not only to differentiate itself from it. In this sense, an ocean blue implies not only the creation of new articles or models and services, but even the establishment of new productive and business processes that generate greater benefits than those employed by the rest of the companies belonging to the same sector.
References
- Advanced Network Consulting. (sf). Obtained from http://hup.com.es/documentos/oceano.pdf Artibus Consulting. (sf). Retrieved from http://artibusconsulting.com/blue-ocean.htmlCastellanos, L. (February 15, 2015). Blue ocean strategy. Retrieved from https://lcestrategia.wordpress.com/tag/oceano-rojo/Chan, W., & Mauborgne, R. (February 15, 2005). The blue ocean strategy: how to create uncontested spaces in the market where competition is irrelevant. Retrieved from https://lcestrategia.wordpress.com/tag/oceano-rojo/Enrique, L. (August 26, 2011). Cyberpolis. Obtained from http://ciberopolis.com/2011/08/26/%C2%BFque-es-una-estrategia-de-innovacion-deoceano-azul/Fernández, M. (June 13, 2013). Registered Marketing. Obtained from http: //www.marketingregistrado.com / columnistas / 2013/06 / 455_los-oceanos-esmeraldadel-marketing / Fernández, M. (2015). ContentLab. Obtained from http://lnmarketing.lanacion.com.ar/sonando-la-realidad.html Gómez, J. (June 19, 2013). The Information Technology Laboratory. Obtained from http://www.laboratorioti.com/2013/06/19/como-innovar-sinando-laestrategia-del-oceano-azul-ii-herramdamientos/López, P. (January 24, 2013). Efficient SMEs. Obtained from https://pymeseficienciadotcom.wordpress.com/Rezk, V. (May 26, 2016). Argentine Marketing Association. Obtained from http://www.aam-ar.org.ar/?pintarse-la-cara-coloresperanza&page=ampliada&id=984&_s=&_page=San Vicente, E. (April 13, 2015). School of money. Retrieved from https://escueladedinero.wordpress.com/2015/04/13/una-estrategia-para-los-oceanosrojos/Urdiz, G. (April 26, 2013).Sage Experience. Obtained from
Thanks
Special thanks to the research professor Fernando Aguirre y Hernández, professor of the master's degree in administrative engineering attached to the Orizaba Technological Institute, for the technical contribution to the construction of this article and its direction in the process of learning systemic thinking. Likewise, to the National Council of Science and Technology (Conacyt) dedicated to promoting and stimulating the development of science and technology in Mexico, for financial support for postgraduate studies.
OCEAN BLUE - FUNDAMENTALS OF ADMINISTRATIVE ENGINEERING - David Osiris Fernández Ábalos - Student: Teresa Román López - Amisaday Huerta Zamora - Hugo García Manilla -Teresa Roman Lopez
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