ECONOMY

Finding a niche market that is free of stiff competition

«Blue Ocean Strategy,» the international best seller by W. Chan Kim and Renee Mauborgne, is to be published in Greek in the coming weeks, challenging Greeks to see business competition from a different viewpoint. «Don’t compete with rivals – make them irrelevant,» write the two academics with successful careers at the INSEAD business school: Kim holds the D. Henderson seat for Strategy and International Management of the Boston Consulting Group at INSEAD, while Mauborgne is a distinguished member of the school’s staff, teaching strategy and management and a member of the World Economic Forum. The two authors aim at providing novel ideas for the creation «of uncontested market space ready for growth, or blue oceans» making competition irrelevant. Their starting point is distinguishing the contemporary business arena in «blue» and «red oceans» i.e. the shrinking profit pools full of competition blood. The key difference between the two is that red oceans are competition-ridden, where business moves are restricted by others’ moves and there is always the risk of products or services becoming identical, while in blue oceans, which are open spaces in the market, demand has not yet been formed, so they offer opportunities for growth and high profits. Kim and Mauborgne, whose book will be published in Greece by Kritiki Publications, have studied 150 strategic moves realized between 1880 and 2000, in order to comprehend how blue oceans are created and high returns are achieved. In the Greek edition’s preface, Alternate Professor of Athens University of Economics and Business Vassilis Papadakis notes that the fact that the authors do not hesitate to reverse fundamental marketing theories – such as Michael Porter’s axiom that it is impossible for low cost and uniqueness to coexist – is indicative of how different their approach is. Their central motto is the creation and not the formation of a strategy which requires great imagination, and yet is combined with systematic analysis. Economic history shows that market limits have never been stable and that blue oceans are always created as time passes, so Kim and Mauborgne prove in practice how beneficial such a prospect is for companies. By studying first the course of 108 new companies they realized that 86 percent of them are mere extensions of red oceans, that is, small improvements that materialized within the already-known market. Nevertheless, these firms corresponded to just 62 percent of total revenues and to no more than 39 percent of total profits. The remaining 14 percent of new companies had aimed at creating blue oceans and accounted for 38 percent of all revenues and 61 percent of total profits. When considering the investments made for the creation of blue and red oceans in total, the advantages of the creation of new spaces for activity become even more obvious. On the other hand, the authors do note the difficulties the creation of blue oceans entail in today’s business environment, where trade on both the local and national level has fewer and fewer limitations while information about products and prices is readily available anywhere on the planet. All these effects of globalization further mean that unused opportunities in the market and the chances of creating monopolies are reduced. At the same time the rules of the game in red oceans become harder. In sectors with a greater number of companies the differentiation of a brand becomes ever more difficult, both when the economy is growing and when it is shrinking. These developments, write Kim and Mauborgne, prove that the environment in which most strategy and management theories were created is gradually vanishing. As red oceans become increasingly crowded, management must be more and more orientated toward blue oceans, which is something the current generation of managers is probably not used to. To make this possible, the authors analyze the strategic moves of specific executives from specific companies, and not just examples of companies, that have succeeded in one aspect but have failed in others.