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Literature Review - Purple Ocean Strategy20191012-80959-1fljd1g
Literature Review - Purple Ocean Strategy20191012-80959-1fljd1g
Contents
1.0 Introduction ................................................ Error! Bookmark not defined.
2.0 Literature Review ....................................... Error! Bookmark not defined.
2.1 Red Ocean Strategy ............................... Error! Bookmark not defined.
2.1.1 Red Ocean Strategy – Upsides ....... Error! Bookmark not defined.
2.1.2 Red Ocean Strategy – Downsides ... Error! Bookmark not defined.
2.2 Blue Ocean Strategy .............................. Error! Bookmark not defined.
2.2.1 Benefits of Blue Ocean Strategy ...... Error! Bookmark not defined.
2.2.2 Approach to Blue Ocean Strategy ... Error! Bookmark not defined.
2.3 Red versus Blue Ocean ......................... Error! Bookmark not defined.
2.4 The Purple Ocean Strategy .................... Error! Bookmark not defined.
2.4.1 Strategic Factors .............................. Error! Bookmark not defined.
2.4.2 The opportunity for Purple Ocean .................................................. 15
3.0 For Marketing and Theory ........................................................................ 17
4.0 Conclusion ............................................................................................... 19
5.0 References............................................................................................... 20
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1.0 Introduction
In 2005, Chan Kim and Renee Mauborgne published the book, Blue Ocean
Strategy that has come to be identified as a paradigm shift in business
strategic thinking. This groundbreaking theory has had a great impact on the
business landscape - shaking and shaping it.
The objective of the Blue Ocean Strategy is simple. Kim C. and Mauborgne R.
(2005) wanted to share a strategic direction of how companies can create
uncontested market spaces, which have the potential to render the
competition irrelevant. The central hypothesis of this strategy requires
businesses to see all the industries and markets existing at the moment as
oceans. There are two overlaying oceans types - the red oceans and blue
oceans.
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The pioneering experience offered by the blue ocean creates a new forte and
accords the business adequate opportunity for speedy, profitable growth.
Technically, competition is deemed irrelevant giving the rules of the game is
yet to be set. With blue oceans, the markets are calm and tranquil and so, do
not become competition battlefields. Kim C. and Mauborgne R. (2005) argue
that genuine business strategies should not give red ocean so much focus, as
is the case most of the time, but to set their eyes on blue oceans which are
unchartered territories with endless possibilities.
The Blue Ocean strategy offers the opportunity to unlock new markets. This,
however, falls short, on practical execution because reality shows that there is
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a gravitational pull on markets towards Red Oceans, in the long run, even the
blue ones because ultimately they will turn red as more sharks swim into the
territory. In actual fact, by wanting to embrace a Blue Ocean strategy, there is
a need to concurrently adopt Red Ocean strategies to protect the new
territory.
Thus, by appropriating the two strategies side by side, there arises a new type
of strategy - the Purple Ocean strategy. Literarily, purple is the secondary
colour obtained when red and blue mixes. An instance of the purple ocean
strategy can be seen with M-Pesa. Safaricom was borrowing a leaf from the
Blue Ocean strategy and pioneered this mobile payment system. This
segment had no defined rules and thus occupied the enviable role of setting
the regulatory pace for the sector. With this, the firm created a whole new
industry and rivals had to unravel and join eventually. However, with the entry
of Equity, Safaricom felt a bit uneasy about the competition this provided, but,
does this transform it into a red ocean immediately? Not so quickly! For now,
it’s just a purple ocean, an exciting new future and as such the Purple Ocean
can be said to be the new colour of business.
The Purple Ocean strategy is founded on the claim that the Blue Ocean
strategy cannot guarantee business success in the long run since the strategy
will eventually turn it into Red; thus, it is not enough to invent or discover “new
blue oceans”, constantly perfecting and improving the current products and
services is what aids significant growth in sales.
An example is the Apple brand, which started off inventing a blue ocean
product. According to Patrick Barwise and Seán Meehanhis (Innovation
Beyond Blue Ocean), this began in summer 2007 when Apple launched the
iPhone, exposing how Nokia had lost its earlier ability to innovate beyond the
familiar. The iPhone was an immediate hit with dramatic consequences for the
industry. This is same as for the Dyson brand who have not stopped
reimagining the vacuum cleaner even though the Hoover got there first and
the market was so crowded, what they have done is to take their product
through 5,127 iterations to deliver a production-ready design of its dual
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cyclone vacuum.
What the Purple Ocean strategy posits is that businesses need to continue to
perfect what they already have – products, services, and processes whilst
they seek new business categories (blue oceans). Nokia took market
leadership from Motorola in the late 1990s and now Samsung has done the
same to Nokia. Discovering new frontiers will be ground-breaking, however,
even the most successful businesses are still improving their best selling
offerings, and they are constantly combining both oceans - blue and red into a
bigger purple ocean.
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prey. This will often mean overcoming an intense level of competition and the
key goals of this strategy are to beat the competition and exploit existing
demand.
Most firms within the red ocean operate under intense competition wanting to
stay ahead and earn maximum market share. With pricing pressure on the
products, there is always a likelihood that a firm's operation could be
threatened. This usually happens when the business is operating in a
saturated market and has to compete with many players. While the firm
strives to fulfill its customers’ existing demand, it also has to place great
emphasis on good service and timely delivery because by emphasizing
customer satisfaction, there is a likelihood they maintain market share and
decrease the possibility that customers would go towards competitors.
• They trade value for cost. This value/cost trade-off strategy means the
company who has the choice between creating more value for customers but
at a higher cost, or reasonable value for customers at a lower cost will choose
the latter.
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With the red ocean strategy, an organisation consequently has to choose one
of two focal strategies – differentiation or low cost. Whichever strategy is
chosen dictates how the organisation will align its activities in order to gain
maximal market share.
Ryan Air – the European airline operator is a good example of firms within the
red ocean. Ryan Air is competing very successfully within the already
saturated red ocean of the short-haul airline business. They have focused on
the low-cost strategy and has achieved this through various methods such as
utilizing secondary airports further away from a city than the main airport,
permitting online booking and check-in only and also by requesting its
customers to pay for all extras, amongst other methods. Ryanair does not
boast of excellent service, but it is cheap.
Marketing agencies are also examples of firms within the red ocean,
constantly competing for business. Consequently, the best agencies are the
ones able to carve out a niche for themselves by focusing on a specialty and
doing it well.
Blue Ocean Strategy is the term used where the market for a product has little
or no competition. This strategy revolves around seeking businesses where
very few firms operate and where there is no pressure on price. The blue
ocean strategy is not limited to just one business. By introducing products or
services, which have never been seen before, the firm creates new demand
and thereby attracting customers. With this strategy, there is significant focus
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and investment on research and development seeing that there is a need to
constantly derive new products.
It is important to note that every blue ocean move will eventually result in the
firm making it back into the red ocean however, the move gives the company
a lead which is essential for understanding and conquering existing
competition, competition will eventually catch up but that will usually take
about 2-3 years.
According to Kim W. C., Mauborgne R., (2004), the real opportunity is that
demand is created and not fought over therefore providing an ample chance
for profitable and quick growth. Blue oceans create uncontested market
spaces where the competition is irrelevant and new demand is quickly
invented to offer customers a high jump in value while also cost-efficient. The
outcome is sizable profits, speedy growth, and lasting brand equity while
rivals scramble to meet up. The Cirque du Soleil is a good example in this
wise, it invented a new industry that fused elements from traditional circus
with sophisticated theater.
To apply the blue ocean strategic moves, it is important that firms do not use
the competition as a benchmark. Instead, the competition should be made
irrelevant by generating a leap in value for the firm and the customers.
Another example is Ford who showcased this with its Model T. Ford could
have positioned the car as fashionable and customized which wealthy people
bought for weekend expeditions in the countryside. Instead, it delivered to its
market, a car for everyday use that was cheaper, durable, and easy to
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maintain compared to rivals’ offerings. Sales of the Model T resounded, and
Ford’s market share surged from 9% in 1908 to 61% in 1921.
The strategy is simply to reduce cost while still offering customers more value.
As seen with the Cirque du Soleil, they omitted costly elements that usually
characterized traditional circuses, such as animal acts and aisle concessions.
Having reduced its cost structure, it was able to provide sophisticated
elements from theater that was an attraction to adult audiences such as the
themes, original scores, and enchanting sets, which will usually change every
year. This strategy increased revenue as the added value got the attention of
customers who were adults and had not been to a circus in years, making
them repeat customers. Cirque created a niche that, till date has no equals by
showcasing the best of circus and theater.
It is important with the blue ocean strategy that firms look at the business from
outside in. Rather than focusing so much on the present customers and how
to get them to buy their products, their perspective should cater for future
customers as well. Leaders of successfully growing companies think broadly.
They are constantly looking for ways to expand the markets they play in. In
the early eighties, Roberto Goizueta employed this strategy of ‘outside in’ for
transforming Coca-Cola. He had asked casually what Coca-Cola’s share was
in the average per capita daily consumption of 64 ounces of fluids given the
4.4 billion people in the world, he wanted to know what Coca-Cola's market
share of the stomach was and the response he got was that it was less than 2
ounces. Goizueta convinced them to look beyond their obvious competition
and include the other forms of competition in that mix such as coffee, milk,
tea, and water. Goizueta helped Coca-Cola expand its market to a size no
one could have imagined. It was same with Jack Welch, who told his business
unit leaders at GE to redefine the market to one in which the current share is
no more than 10%; he challenged them to seek market segments that are
growing-or create them. Discovering those segments is the initial step in
getting out of the 'served market' trap. The most available and powerful
segmentation focuses on an adjacent segment where one can sell an
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additional product or service. This allows one to leverage an existing skill and
resources into new business.
Staying put in the red oceans should obviously be avoided giving that it is
overrun with numerous competition scarcely having any differentiating factors;
nonetheless, firms should not be quick to jump into the blue oceans either.
One could ask the question – why is the ocean blue?
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2.4 The Purple Ocean Strategy
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Some literatures have argued that there is another ocean in between red and
blue, which they call the Purple Ocean Strategy (Saratid, 2011). Nithisathian,
Kittichok and Walsh posited that As the Blue Ocean Strategy states that a
Red Ocean Strategy (Competitive Strategy) does not guarantee success for
the firm, a Purple Ocean strategy also claims that the Blue Ocean strategy
cannot ascertain success for the firm in the long run because the Blue Ocean
strategy will at the end, turn Red.
The Purple Ocean strategy is the new terminology being used to describe
when the red ocean (highly competitive markets) mixes with the blue ocean
(New Untouched Markets / New Business Categories). The Purple Ocean
strategy claims that in today’s business world, organizations need both
innovative ideas and a series of strategies in order to compete and remain
functional in the long run.
Accordingly, the term Purple Ocean strategy was originally adopted following
the generation of the secondary colour when red and blue colours are
combined. The strategy believes in the strength of alliances as the way to
engender new business conditions and as a tool to refine organisations and
their processes. Additionally, sustaining bargaining power from strategic
alliances is critical to the Purple Ocean strategy.
In the real world of business, it is possible not to find a blue ocean but instead,
red with shades of purple (Barwise and Meehan, 2012). Seeing that some
literature agree with the existence of the Purple Ocean strategy, the main
characteristics of this ocean remains undefined. However, many suggestions
abound in literature today.
Among the first scholars to propose the purple ocean strategy is Joe Leung
(Liang Yongzhon) - founder of organizational learning consultancy limited and
according to him, an enterprise must perfect the five main elements of -
competence, customer, cash, cost, and counterpart, in order to be well
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positioned in the “purple oceans”. He claims that for enterprises to excel, the
leaders need to have a good understanding of the consumers’ behavior and
as a result, balance strategies to social development. His argument is that
even technological innovation is not as vital as the innovation of the mind.
Leaders within a firm need to have an innovative mindset in order to produce
Barwise and Meehan (2012) considered the examples of Motorola, Nokia and
Samsung and state that firms who do not want to suffer the same fate as
Nokia should develop goals that focus on the purple areas of ocean extending
farther than the edge of actual markets with a constant organic evolution and
a reliable communication towards customers regarding their core promise.
Red and blue oceans have always co-existed and thus purple oceans
describe where they overlap. However, does the blue ocean strategy have
any merit? Is it overrated? Is a new paradigm required? Is an ocean typology
required? Does it put into consideration the various nuances of how markets
work and how firms compete and innovate? Are corporate business
strategists bothered about the colour of the ocean or are they more focused
on survival and keeping up with or overtaking the competition? To what extent
do firms require innovation to survive and how will they achieve this? Should
they look to dominate existing markets or seek opportunities to develop new
ones? And if a firm moves into a new market should they be a pioneer or a
fast follower?
According to Patrick Barwise (2012), the honest truth is that most pioneers
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end up crashing, disappointed and forgotten. They realize that the opportunity
is a mirage, or are quickly overtaken by an early follower who executes better.
Many times, the Pioneer takes the risks, makes the mistakes and the quick
imitator learns from these mistakes, modifies their offering, re-organises,
invests wisely and many times goes on to take over/own the market.
Gandellini and Venanz (2011) argue that the concept of making the
competition irrelevant as seen in the blue ocean strategy is a little bold, even
in specific market scenarios and more so in periods of economic crisis.
The rhetoric of the blue ocean strategy, and the contemptuous reference to
companies trapped in a red ocean seriously diminish the importance of
keeping the promise, reliably delivering it and relentlessly improving through
progressive innovation. Realistically, the ocean varies from red to various
shades of purple and as such, companies need to constantly improve on the
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basics to circumvent the fate of Motorola – whilst occasionally innovating
beyond the familiar to avoid that of Nokia. Apple and Samsung have
successfully applied elements of the purple ocean in order to defend their
gained market share.
There are three strategic factors that contribute to the development of the
Purple Ocean and by mixing the Red and Blue Ocean Models at different
chromatic levels, we can further consider these strategies.
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3. Adaptive organisational culture: a strategic model whose cultural
element relates to how its employees perceive the firm; it also relates to the
capacity of the organisation to adapt to consumers’ demand and feedback. It
is highly influenced by cultural and societal differences and will need to be
divided into small sizes to enable a faster measurement of the target markets'
reaction and response especially where the markets are extremely diversified
with respect to the dominant demand.
Point 2 connects with Nokia’s big move to go into unknown markets and as
such, made an aggressive move from analogic to digital mobile technology.
Nokia also adopted same branding strategy thereby gaining quicker
penetrating time even in countries still under development.
Lastly, regarding point 3, Nokia took consumer evaluation very seriously and
in 2003, restructured the whole organisation in order to allow a faster
response time and thereby, a better insight into unexplored markets. As
described by Gupta (2012), the overall restructuring resulted in efficient and
sophisticated consumer segmentation. Also, as previously mentioned,
Samsung used the same strategic moves to overtake Nokia in market share;
and as such, Nokia is today where Motorola was in 1994.
Unlike Motorola, Samsumg kept the basics in their strategy whilst also
combining the classics with what Barwise and Meehan (2012) referred to as a
growing ability to innovate beyond the familiar. In order to avoid Nokia’s
situation in the long run, organisations will have to develop strategies that deal
with the chromatic density of the Red Ocean component, where techniques
such as Value Innovation may be extremely practical. The intended result is
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for firms to develop Purple areas of Ocean beyond the boundaries of actual
markets with a constant organic progression and dependable communication
towards consumers respecting their core promise. Else, they run the risk of
ending up quite quickly like Motorola.
In reality, it is quite difficult to see an absolute Blue Ocean. And when it does
exist, the company that creates it rarely achieves market leadership in the
long run. The dominant colour in real-world markets seems to change over
time from red to reddish-purple to purple, displaying varying chromatic levels
where Red is still a basic component. Therefore, in most cases, vendors are
positioned in the midst of Red and Blue Oceans - the Purple Oceans. Purple
Ocean strategy promotes relentless innovation; so many traditional
enterprises such as Samsung, Nokia, and Motorola have done this and as
such avoided falling into the Dead Ocean.
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In their book “In The Self-made Billionaire Effect: How Extreme Producers
Create Massive Value”, Sviokla and Cohen posited that 80 percent of the self-
made billionaires that they studied made their fortunes in contested market
spaces and thus show that majority of today’s wealthiest people made their
billions without regard for the blue ocean.
There are many case studies offered by Svioka and Cohen in their well-
researched book of other self-made billionaires who excelled in markets that
were by all measures, red. The authors however, do not argue in favour of
red over blue, their contention is that their research shows that self-made
billionaires ignore the difference. To them, oceans are purple, which is a blend
of available opportunity within established practice. Thus these billionaires
excel by combining new approaches within old modes to reveal ways to re-
create the space.
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4.0 Conclusion
This paper examined the relevance of the Purple Ocean strategy in a dynamic
and contemporary environment. Just as the Blue Ocean Strategy argues that
the competitive nature of the Red ocean Strategy does not assure success for
the firm, a Purple Ocean strategy also states that the Blue Ocean Strategy
cannot promise business success in the long run since the Blue Ocean
strategy will eventually turn Red. The strategy of the Purple Ocean believes
that in today’s market’s space, organizations need to be both innovative and
strategic in order to compete with competition and stay relevant in the long
term.
Content analysis from research and literature reviews have been used to
demonstrate mainstream Purple Ocean strategy focused on challenging firms
to free their vision from known business conditions and social norms, to
expand on customer value and experience, and utilize human resources
efficiently. The Purple Ocean strategy believes in the power of alliances as
the way to generate new business conditions as well as a tool to fine-tune
organizations. Maintaining bargaining power from strategic alliances is
essential to the success of the Purple Ocean strategy and this can be
achieved through a series of firm actions concerning communications and
their execution.
Thus, there are no permanent Blue Oceans in reality; when competitors begin
to imitate, Blue Oceans turn into Red Oceans. Therefore in most cases,
vendors are situated in the midst of Red and Blue Oceans – this is the Purple
Ocean. Purple Ocean strategy thus advocates continuous innovation as
shown by countless traditional enterprises, however, the right level of focus
needs to be given to competition that cannot be excluded from the market
model.
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5.0 References
Barwise P., Meehan S., (2012), Innovation beyond blue oceans, Market
Leader, Issue Q4, p24-27. 4p.
Cavagnetto S., Gahir B., (2013), Shades of Purple Strategy, CRIS - Bulletin
of the Centre for Research and Interdisciplinary Study, Volume 2013: Issue 1
Kim W. C., Mauborgne R., (2004), Blue Ocean Strategy, Harvard business
review, Harvard Business School Publishing Corporation
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Nithisathian K. Wall W.P. Thanitnan C. Pongwiritthon R., (2018), Maintaining
Indispensable Competitive Advantage: Corporate Strategy for 21st Century,
RMUTL Journal of Humanities and Social Sciences, Vol.6 No.1
Pichère P., Feys B., Probert C., (2015) Blue Ocean Strategy Concept -
Overview & Analysis : Achieve Success Through Innovation and Make the
Competition Irrelevant, Management & Marketing, v. 16
Sajna F., (2015), Blue green red and purple ocean strategy, Slideshare,
https://www.slideshare.net/sajnafathima988/blue-green-red-and-purple-
ocean-strategy?from_action=save
Sissey M., (2016) Purple Ocean Strategy, the new catchword in business
thinking, http://www.marvinsissey.com/purple-ocean-strategythe-new-
catchword-in-business-thinking/
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