BLUE OCEAN STRATEGY VS. PORTER’S 5 FORCES

BLUE OCEAN STRATEGY VS. 5 FORCES OF PORTERS

The blue ocean strategy is concentrating in the e-commerce area while in the porters 5 forces is in the real world. The blue ocean strategy makes its business commonly in service and we almost know that there are no physical products that we have hold. The 5 forces of porters gave us knowledge about the physical product that we want to avail. We have gathered together some relevant research findings on this popular debate in strategic management. Essentially both schools of thought feed off the same economic model. Their difference is what they think is happening out there in the real world. The proponents of competitive strategy, largely going back to Porter, take the view that competition is the main issue that senior business managers ought to be addressing. That is what they see as the main challenge facing organizations.

The proponents of the blue ocean strategy take the view that innovation should create new market space, tap into unsatisfied consumer demand, and find uncontested market space. In this way, competition can become quite irrelevant. Now blue ocean strategy has had a lot of enthusiasts and people like Starbucks and Dell have been cited as examples where you can get into territory that is uncontested and profitable.

So let me deal first of all with competitive strategy. If competitive strategy is right, then in the long term there should be a negative relationship between the number of firms in an industry and the profit levels; essentially that is the essence of the Five Forces. The more firms that you have in the competition, then the lower the profitability of the market. What we find is that in the long run is that profitability does indeed decline with competition, but it is actually quite a pedestrian force. Put differently it takes about fifteen years for an industry to push an innovation’s profits back down to a very basic level. What that means is that the profit gains from innovation, in an existing market, are quite a lot more than previously supposed. The implication of that is that companies should pay close attention to their existing markets when looking for opportunities for innovation. We found in relation to the retail sector that, as the number of firms has come into the market, the market has expanded. This tells you that these firms can’t just be fulfilling a competition role; they are fulfilling an entrepreneurial role in bringing innovation into the market, expanding the market in the process by drawing in more consumer expenditure. The results provide some partial support for blue ocean strategy, particularly in relation to the role of competition which we found not to be the strongest as previously imagined and of course the role of innovation. But right at the core of blue ocean strategy is the view that you should find new markets space and pioneer new markets. We have gathered together some relevant research findings on this popular debate in strategic management. Essentially both schools of thought feed off the same economic model. Their difference is what they think is happening out there in the real world. The proponents of competitive strategy, largely going back to Porter, take the view that competition is the main issue that senior business managers ought to be addressing. That is what they see as the main challenge facing organizations. A close look at this in practice provided some valuable results.

What I find is that in the long run is that profitability does indeed decline with competition, but it is actually quite a pedestrian force. Put differently it takes about fifteen years for an industry to push an innovation’s profits back down to a very basic level. What that means is that the profit gains from innovation, in an existing market, are quite a lot more than previously supposed. The implication of that is that companies should pay close attention to their existing markets when looking for opportunities for innovation. I found in relation to the retail sector that, as the number of firms has come into the market, the market has expanded. This tells you that these firms can’t just be fulfilling a competition role; they are fulfilling an entrepreneurial role in bringing innovation into the market, expanding the market in the process by drawing in more consumer expenditure. The results of the study about the blue ocean provide some partial support for blue ocean strategy, particularly in relation to the role of competition which we found not to be the strongest as previously imagined and of course the role of innovation. But right at the core of blue ocean strategy is the view that you should find new markets space and pioneer new markets.

In the world of business today we can say that blue ocean strategy and 5 forces of Porter is an effective tool for better business. If this strategies and analysis will be apply effective and efficient business will occur. In the part of the business that are engaging in the e-commerce and e-tailing it is better to apply the blue ocean strategy. But before you can apply the blue ocean strategy in your business I can say that 5 forces of Porter must apply first to know the effect of business in the outside world.

This illustration of FEC POS Manufacturing in their website www.fecpos.com this is the 5 competitive forces according to Porter.

 

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