BLUE OCEAN STRATEGY - MALAYSIAN ARMY

BLUE OCEAN STRATEGY

Blue Ocean Strategy is a business strategy book first published in 2005 and written by W. Chan Kim and Renée Mauborgne of The Blue Ocean Strategy Institute at INSEAD (an international graduate business school and research institution. INSEAD founded in 1957 as "Institut Européen d'Administration des Affaires" (European Institute for Business Administration),. The book illustrates what the authors believe is the high growth and profits an organisation can generate by creating new demand in an uncontested market space, or a "Blue Ocean", than by competing head-to-head with other suppliers for known customers in an existing industry.

It is a creative and non combative approach. It shows how to break from the status quo, create a winning future strategy, and execute this fast at low cost.

“Blue Ocean Strategy” - the correlation of success stories across industries and the formulation of strategies that provide a solid base create unconventional success. It tries to align innovation with utility, price and cost positions.

“Red Ocean Strategy” - the conventional approach to business of beating competition derived from the military organisation.

Concept

Red Oceans are all the industries in existence today - the known market space. In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform their rivals to grab a greater share of product or service demand. As the market space gets crowded, prospects for profits and growth are reduced. Products become commodities or niche, and cut throat competition turns the ocean bloody.

Blue Oceans, in contrast, denote all the industries not in existence today - the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored.

The corner-stone of Blue Ocean Strategy is 'Value Innovation'. A blue ocean is created when a company achieves value innovation that creates value simultaneously for both the buyer and the company. The innovation (in product, service, or delivery) must raise and create value for the market, while simultaneously reducing or eliminating features or services that are less valued by the current or future market.

Blue Ocean Strategy Vs. Competition Based Strategies

Kim and Mauborgne argue that traditional competition-based strategies (red ocean strategies) while necessary, are not sufficient to sustain high performance. Companies need to go beyond competing. To seize new profit and growth opportunities they also need to create blue oceans.

Competition based strategies assume that an industry’s structural conditions are given and that firms are forced to compete within them, an assumption based on what academics call the structuralist view, or environmental determinism. To sustain themselves in the marketplace, practitioners of Red Ocean Strategy focus on building advantages over the competition, usually by assessing what competitors do and striving to do it better. Here, grabbing a bigger share of the market is seen as a zero-sum game in which one company’s gain is achieved at another company’s loss. Hence, competition, the supply side of the equation, becomes the defining variable of strategy. Here, cost and value are seen as trade-offs and a firm chooses a distinctive cost or differentiation position. Because the total profit level of the industry is also determined exogenously by structural factors, firms principally seek to capture and redistribute wealth instead of creating wealth. They focus on dividing up the red ocean, where growth is increasingly limited.

Blue Ocean Strategy, on the other hand, is based on the view that market boundaries and industry structure are not given and can be reconstructed by the actions and beliefs of industry players. Competition in the old game is therefore rendered irrelevant. By expanding the demand side of the economy new wealth is created. Such a strategy therefore allows firms to largely play a non–zero-sum game, with high payoff possibilities.

Blue Ocean Strategy 1

Royal Malaysian Police – reduce crime by increasing number of policemen in the streets.  Clerical work done by civil servants.

Blue Ocean Strategy 2

1. Community Rehabilitation Programme.

2. Recruitment of retired military personnel by RMP

3. Training of police personnel using military facilities.

4. Joint patrol between military and police

5. General Operation Force (PGA) – used for urban crime prevention.

Blue Ocean Strategy 3

1.         Building of infrastructure by combining effort with military
2. Combining use of military land and rural labour for high valued added economic activities

2.         NKRA – National Key Result Areas (Bidang Keberhasilan Utama Negara).

3.         NKEA -  National Key Economic Areas