Learning Unit

International Markets

“"The blue Ocean Strategy".

Student:

Teacher: Dr.
 INTRODUCTION

In the book that we are going to talk about in this essay, we are going to have to go
back to the economics classes in which we learned very important key concepts in
order to have a better understanding of the book that is why in this introduction I will
return to some key concepts.
Let's begin by remembering that the term competition in an economic field refers to
the situations of a market where a large number of applicants and suppliers of a
specific good or service can be found. This makes a company "fight" or "fight" to
position itself among the competitors in a specific market, offering facilities or
opportunities that others do not.
Another key point in this text is the market which can be defined as a process that
operates when there are people who act as buyers and others as sellers of goods
and services, generating the action of the exchange.
And this is how I will conclude with a concept that we must keep in mind at all times,
because the key to always being in a red or blue sea is going to be, and this is
nothing more than innovation which consists of using knowledge to build a new path
that leads to a certain goal.
This book tells us of teachings on how strategies can give us new markets and
distinguish us from the competition, but in this book this strategy has a name is
called: the blue ocean strategy that is a challenge for companies to abandon the
bloody ocean of competition and create safe spaces in the market in which
competition does not matter.

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Chapter I. The creation of the blue oceans

The blue ocean strategy is a challenge for companies to abandon the bloody ocean of competition and create
safe spaces in the market in which competition does not matter.

A new space in the market.

To be successful in the future, companies will have to stop competing with each other. The only way to beat the
competition is to stop trying to beat it. Blue oceans represent all industries that do not currently exist. It is an
unknown space in the market. They are defined as untapped market spaces and by creating demand and
opportunity for highly profitable growth. Meanwhile, in the red oceans, the borders of the industries are defined
and accepted and the rules of the game are known, in addition to trying to overcome rivals in order to take a
greater share of the existing demand. As the market space becomes saturated, the prospects for profitability
and growth shrink. The products become generic goods and the competition to the death stains the water of
the red ocean with blood.

Yet despite this, strategic thinking in recent years has focused primarily on red ocean strategies where
competition prevails.

Creation continues from blue oceans.

The reality is that industries never remain static but rather constantly evolve. Operations improve, markets
expand, and companies come and go. The ability to create new industries and recreate existing ones has been
greatly underestimated. The explanation, therefore that strategic thinking revolves around strategies for red
oceans where competition prevails is perhaps the influence of the military strategy from which the corporate
strategy originated. This has generated denial regarding the strength that distinguishes the business world: the
ability to create new spaces without competition.

The impact of creating the blue oceans

It is of utmost importance to quantify the impact that the creation of blue oceans has on the growth of a
company, both in terms of income and profits, to determine its development in general terms. Considering that
the new business launches included total investments to create both red and blue oceans (regardless of
income and profit consequences and including failures), the benefit of creating blue oceans in Regarding
performance, it is obvious. The difference in performance between them in global terms is remarkable.

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Chapter II. Analytical tools and schematics

Various analytical tools and schemes exist to provide an approach to formulating and executing the blue ocean
strategy, which are systematically structured, practical, and empower executives to be brave and enterprising,
learn from failure, and seek revolutionary breakthroughs. In order to minimize risks instead of promoting them.

The strategic picture

It is a diagnostic tool and a practical blueprint for building a compelling blue ocean strategy. It serves two
purposes: Capture the current scheme of competition in the known market in order to shed light on the
investments of the various actors, on the variables around which the industry currently competes in products,
services and delivery, and on what customers receive when they stop what competitors currently offer in the
market. One of its main components is the value curve, which is a graphic representation of the relative
performance of a company in relation to the variables of the competition in its industry. For the modification to
the strategic picture of an industry, it is necessary to begin by focusing the strategy not on the competitors but
on the alternatives, and not on the clients but on the non-clients of the industry.

The scheme of the four actions

In order to reconstruct the elements of value for the buyer within the construction of a new value curve, a
scheme of the four actions was developed, in order to break the trade-off between differentiation and low cost
and create a new curve of value. This scheme is based on four key questions that tend to question the
strategic logic and business model of an industry.

1. What variables that the industry takes for granted should be eliminated, its purpose is to force you to think
about eliminating variables around which competition in a certain industry has revolved around for a long time.

2. What variables should be reduced well below the industry norm? Seeks to determine if the dimension of the
products or services has been exaggerated as a result of the race to achieve use and to review the
competition.

3. Which variables should be increased well above the industry norm? It leads to discovering and eliminating
the sacrifices that the industry imposes on customers.

4. What variables should be created because the industry has never offered them ?, helps to discover
completely new sources of value for buyers, to create a demand that did not exist before and to modify the
pricing strategy of the industry. Taken together, these variables allow for a systematic analysis of how to rebuild
valuable items for buyers drawn from various industries to deliver a completely new experience while
maintaining a reduced cost structure.

The matrix "Delete-reduce-increase-create"

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This matrix encourages companies not only to ask the four questions in the scheme but also to act on those
four questions in order to create a new value curve. By filling the matrix with the actions of eliminating,
reducing, increasing and creating, companies obtain four benefits:

1. They force themselves to search simultaneously for differentiation and low cost to end the trade-off between
value and cost.

2. They can immediately identify if they are only oriented to increase and create, elevating their cost and
service structure, a problem that often afflicts many.

3. Its managers at any level can easily understand it, which facilitates their commitment to apply it.

4. As the task of filling the matrix is demanding, it forces them to examine in order to make one of the variables
around which the industry competes and thus discover the range of implicit assumptions made when
competing.

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Chapter III. Reconstruction of market borders

The first principle of the blue ocean strategy is to rebuild the borders of the market in order to separate itself
from the competition and create blue oceans. This principle corrects the search risk that affects so many
companies. For this, there are six basic approaches that together are called the “six-way scheme”, which are
applicable to all sectors of the industry and have the ability to see the known realities with new eyes. These
principles consist of:

1. Define your industry in practically the same terms and focus your efforts on being the best in it.

2. See your industry through the lens of generally accepted strategic groups.

3. Target the same group of buyers.

4. Define in a similar way the scope of the products and services offered in your industry.

5. Accept the functional or emotional orientation of your industry.

6. Concentrate on the same point in time. It is important to consider that the more common this conventional
way of thinking about competition is for companies, the greater the competitive convergence between them.

 First way: explore alternative industries

 A company does not compete only with other companies in its industry but with those that belong to other
industries that generate alternative products or services. For this reason, the importance of differentiating
products or services, since there are those that have different forms but offer the same functionality or the
same basic utility, are substitutes for each other. Meanwhile, alternatives comprise products or services whose
functions and forms are different but serve the same purpose. Every time a buyer makes a purchase decision,
he implicitly weighs the alternatives. The mental process is intuitive both for the individual consumer and for
industrial buyers. For their part, sellers seldom consciously think about how customers choose among the
alternatives offered by different industries.

Second way: explore the strategic groups within each sector

 Strategic groups refer to a group of companies within the same industry that apply a similar strategy. The key
to creating a blue ocean that encompasses existing strategic groups is correcting the narrow tunnel vision by
understanding what factors influence customers' decision to move from one group to another.

Third way: explore the buyer chain

 The chain of "buyers" participates directly or indirectly in the purchase decision. The buyers who pay for the product or
service may differ from users, and in some cases there are also opinion leaders who influence the decision. By exploring
all buyer groups, companies can identify new ways to change their value curves and focus on a group of buyers that was
previously overlooked. Herein lies the importance of always considering which is the chain of buyers in the industry,
identifying the group of buyers that is generally concentrated, analyzing the situation in the event that the group of buyers
is changed and thinking about what would be the way to generate a new value
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Chapter IV. Focus on global perspective not on numbers

This principle refers to focusing on the global perspective and not on the figures. In addition, it is essential to
mitigate the risk of planning, consisting of investing a lot of time and effort to achieve only a few tactical
movements in the middle of the Red Ocean. The ultimate goal of this approach is not to create a document,
but to draw a strategic picture. It is an approach from which it is possible to continuously generate easy to
understand, communicate and execute strategies with the purpose of unleashing the creativity of a wide range
of people within the organization and opening the eyes of the company of the blue oceans.

Focus on global perspective

Drawing the strategic chart not only allows you to visualize the current strategic position of the company within
its market but also chart the future strategy. The company and its managers can focus their attention on the
global perspective instead of being distracted by the numbers and terminology, and getting caught up in the
operational details. The strategic picture fulfills three purposes:

1. The strategic profile of an industry, 2. The strategic profile of existing and potential competitors and 3.
Reveals the variables in which they invest as part of their strategy, shows the strategic profile of the company,
or its value curve, where the way in which it invests in competitive variables and how it could invest in them in
the future is revealed.

Preparation of the strategic table

The process of preparing the strategic picture consists of four steps and is based on the six ways to create
blue oceans and a high degree of visual stimulation whose purpose is to unleash people's creativity. The steps
to visualize the strategy are:

1. Visual awakening: compares the business with that of the competitors by drawing the strategic table "as is";
you see where you need to change your strategy. In this step, the table operates as an alert that encourages
companies to question their existing strategies.

2. Visual exploration: This step consists of taking a group of managers to the field in order to face them with a
reality that they must understand: the way people use their products or services. You have to go out into the
field to explore the six routes to create blue oceans, you can see the clear advantages of alternatives for
products and services, and you can see which variables should be eliminated, created or changed.

3. Visual fair of the strategy: the strategic center is drawn “as it should be” based on what has been learned in
the field observations and feedback is obtained on other possible strategic charts of the clients, the clients of
their competitors and the non-clients.

4. Visual communication: Once the future strategy is established, the last step is to communicate it in such a way that any
employee can easily understand it. The “before” and “after” strategic profiles are distributed on the same page to facilitate
comparison; Only projects and operational movements that allow the company to fill the gaps in order to make the new
strategy a reality will be supported.
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 CONCLUSION

The blue ocean strategy is based on leaving aside the destructive competition that can be
generated between companies, when you want to fight for the same market, the strategy
serves to be a winner in the future, innovating and expanding the horizons of the market.

The red ocean strategy leads companies to compete in existing markets where they fight
to be the company that stands out the most, this fierce competition turns the waters red,
they manage to compete with each other by modifying or lowering prices.

Every time more companies appear in the competitive market, the possibilities of growth
and profit are diminishing.

The blue ocean strategy makes companies look for a new market, ensuring that there is no
rivalry between them, creating and capturing new demand. The strategy is based on
aligning all the activities of the organization with the objective of reducing costs and
increasing the value of products. Doing so creates opportunities for profitable and sustained
long-term growth.

Using the blue ocean strategy allows us not to wear ourselves out as a company, as we are
competing against other companies that are in the same market, as Cirque Du Soleil did,
he no longer wanted to continue with the idea of traditional circuses that They only
competed with each other seeking to improve the same acts as always and hiring new stars
generating a high cost of production, they decided to innovate in the circus industry by
combining circus acts with the theater, thus achieving a new market that not only included
children if not people of all ages.