ITPEC IP October 2020 Question 84

Generating a new market with no competition by providing new value — that is blue ocean strategy.

Blue ocean strategy (Kim and Mauborgne) contrasts two kinds of market. A red ocean is an existing industry where rivals fight over the same demand, so profits shrink. A blue ocean is market space nobody serves yet, opened by value innovation: dropping or reducing factors the industry competes on while raising or creating others, so buyers get new value, often at a lower cost. Competition is made irrelevant rather than beaten.

Answer (a)

Why not others:

• •(b) — handling a wide range of products beyond the best sellers, to collect many small sales, is the long tail
• •(c) — thorough differentiation from the top companies' products is a differentiation strategy; it still competes in the existing market, a red ocean
• •(d) — gaining predominance over competitors through cost reduction is cost leadership, again a way of fighting in the existing market

Key rule: Differentiation and cost leadership win inside an existing market (red ocean); blue ocean strategy creates a new market where there are no competitors yet.

Business Strategy Management · AI-written, may contain errors