Scribd
Upload
124 views4 pages

Blue Ocean vs. Five Forces

The document compares blue ocean strategy, which focuses on creating new markets, to competitive strategy, which aims to dominate existing markets. The researchers conducted an empirical study of the Dutch retailing industry from 1982-2000 looking at profits and number of vendors over time for various shop types. They found evidence that blue ocean strategy can be sustainable, as in over half of shop types profits and number of firms increased together. Controlling for other factors, overall firm profitability and number of vendors rose and fell together, indicating blue ocean opportunities were not limited. However, competition eventually erodes the profits from innovation, though this is a slow process taking around 15 years. Therefore, businesses may benefit from combining blue and competitive strategies.

Uploaded by

Muthu Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
124 views4 pages

Blue Ocean vs. Five Forces

The document compares blue ocean strategy, which focuses on creating new markets, to competitive strategy, which aims to dominate existing markets. The researchers conducted an empirical study of the Dutch retailing industry from 1982-2000 looking at profits and number of vendors over time for various shop types. They found evidence that blue ocean strategy can be sustainable, as in over half of shop types profits and number of firms increased together. Controlling for other factors, overall firm profitability and number of vendors rose and fell together, indicating blue ocean opportunities were not limited. However, competition eventually erodes the profits from innovation, though this is a slow process taking around 15 years. Therefore, businesses may benefit from combining blue and competitive strategies.

Uploaded by

Muthu Kumar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

Competitive Strategy

Blue Ocean vs. Five Forces


by Andrew Burke, André van Stel, and Roy Thurik
From the Magazine (May 2010)

Are you a five-forces disciple or a blue-ocean enthusiast? That is,


do you try to dominate existing markets or look for opportunities
to create new ones? Both approaches to strategy have their
devotees, but to the best of our knowledge, no one before now has
conducted an empirical study comparing the two camps.

So we did. For our research framework, we used a model that


dates back to a seminal 1921 economics paper by Harold
Hotelling. It posits that as long as there are profits to be had in a
particular market, more and more vendors will arrive to serve that
market until it reaches a saturation point, where everyone more
or less breaks even.

Looking at entire industries in this way allows you to tell over


time whether an innovation strategy or a competitive strategy is
best. Of course, the blue-ocean approach to this model would call
for creating a new market. If that attracted consumers over the
long term, industry profits and the number of vendors would both
steadily increase—and you could conclude that companies
succeed by staking out new markets. If, however, firm
profitability went down as the number of firms went up, you’d
know that the scope of new opportunities was limited or that the
barriers to following the trailblazer were very low. Either way in
that scenario, companies focused on competition would
outperform those setting their sights on blue oceans.
We tested the model on Dutch retailing. (Although one study
doesn’t constitute proof, this industry provides a good lab because
it has shown signs of being both highly competitive and markedly
innovative over the past two decades.) Its frequent new-brand
introductions and widespread use of differentiation strategies
have led to increased market segmentation, deeper and broader
markets, and the rejuvenation of “tired” sectors such as hardware
stores.

We looked at profits and numbers of vendors for 41 shop types


over a 19-year period (1982–2000). In 2000 these shop types
accounted for some 83% of all Dutch retail stores and about 90%
of the industry’s revenue and employment. We were surprised to
find evidence that blue-ocean strategy is sustainable. In more
than half the shop types, average firm profits and the number of
firms were positively related. And more important, after
controlling for extraneous factors such as business-cycle effects,
we discovered across all types that average firm profitability and
the number of vendors rose and fell together over the period.

Of course, it would be foolish to dismiss competitive strategy


altogether. Our research shows that competition eventually
erodes the profits from innovation. But that’s a slow process,
requiring 15 years or so, which suggests that it takes the better part
of a generation for the blue-ocean approach to yield to
competitive strategy.

Competition eventually erodes the


profits from innovation. But that’s a
slow process, requiring 15 years or so.

All this indicates that businesses may want to consider a blend of


the two approaches. For instance, by slowing down profit erosion
with an effective competitive strategy for an existing market, they
can increase the funds available for blue-ocean investments and
thus their chances of finding an untapped market with plenty of
consumers.
AReview.
version of this article appeared in the May 2010 issue of Harvard Business

AB
Andrew Burke is a professor and director, and
Stephanie Hussels is a lecturer, at the Bettany
Centre for Entrepreneurship at Cranfield
University.

AS
André van Stel is a senior researcher at EIM
Business and Policy Research.

RT
Roy Thurik is a professor at Erasmus
University. For more about their research, go to
.

Tweet

Post

Share

Save
Buy Copies

Print

Recommended For You


Create a Conversation, Not a Presentation

Blue Ocean Strategy

PODCAST
What Is Blue Ocean Strategy - and Where Does It Go Wrong?

A Checklist for More Persuasive Presentations

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy