Blue Ocean Strategy Paper Essays (783 words) - Outerwall, Inc.

Blue Ocean Strategy Paper Essays (783 words) - Outerwall, Inc. Blue Ocean Strategy Paper MKT/421 Blue Ocean Strategy Paper When undertaking a business endeavor individuals and firms alike must determine a strategy. One of the most important strategic dilemmas is whether to use a blue or red ocean strategy when creating new products. Both strategies possess strengths and weaknesses that need careful consideration before launching new products. Description and Importance of Blue Ocean Strategy Growth in any business is often associated with innovation. That is, paving the way in creating a ground breaking product previously unheard of. In many ways innovation can be associated with a blue ocean strategy. Blue oceans denote all the industries not in existence today-the unknown market space, untainted by competition(Kim and Mauborgne, 2004, pg.77). This strategy is especially important not only for the growth within a firm, but also, growth with societies. Innovative ideas, goods, and services are needed in order to generate growth for both societies and economies. One of the most appealing benefits of blue ocean strategy is creation of new industries within untapped market space means that there is no initial competition with little to no barriers to entry. This allows the opportunity for generation of profit at drastic rates. Additionally, rather than exploiting and sharing a portion of demand from competitors, blue ocean strategy creates demand. This allows the firm to capitalize from all of the newly created demand. As with most things, blue ocean strategy also has weaknesses. Although firms do not share portions of customer demand, creating demand within a new industry is challenging. Additionally, because there are no similar products in market there are no accurate indications as to whether the product will result in success or failure. What is important to understand is that while the rewards associated with blue ocean strategy are high, the risks attached are also escalated. Example of Blue Ocean Strategies It is important to understand that blue ocean strategy includes more than giving rise to entirely new industries. In most cases, a blue ocean is created from within a red ocean when a company alters the boundaries of an existing industry(Kim and Mauborgne, 2004, pg.78). An example of a blue ocean move was the introduction of Redbox movie kiosks by Outerwall Inc. Movie rentals within the entertainment industry were not a new concept. However, Redbox revolutionized this industry through placing movie rental kiosks at convenient locations. Rather than driving to movie rental stores and spending large amounts of money to rent newly released movies, customers could drive to the local convenience store and rent movies at a much lower rate. This is an example of a blue ocean move because rather than introducing another substitute version of Blockbuster movie rental stores, Redbox chose a path that altered the existing industry. Altering the manner in which customers can rent movies to more of a self-service option, decreases costs, in turn savings can be transferred to consumers providing an enticing option for movie rentals. Alternative Red Ocean Strategy Redboxs decision to use a red ocean strategy in attempting to enter the crowded market of video streaming with the introduction of Redbox Instant resulted in the exact opposite of the movie rental kiosks. It could be said that just as quickly as Redbox movie kiosks became a desired product and flourished, Redbox Instant failed. Redbox Instant, a joint venture between Verizon Communications Inc and Outerwall Inc was operational for approximately one year before the two determined the venture was not as successful as either had hoped (The Huffington Post, 2015). This is an example of a red ocean strategy because the joint venture attempted to tap into a market which already had generated demand. While previously generated demand is one of the strengths associated with using red ocean strategy, the result of this joint venture is prime example of just how dangerous red ocean strategy is when attempting to enter an already crowded market industry. Conclusion The important thing to remember when marketing new products is that products should encapsulate the satisfaction of customer needs(Perreault, Cannon, and McCarthy, 2011). A firm must quickly decide whether to enter into an existing market space or create a new market space. Evaluating the pros and cons of both red and blue ocean strategy will help