| I was in Star Bucks Club Ultima this afternoon to talk | | | | fly" (A play on the words "every juan" = "everyone", |
| with a friend regarding a new business that he is | | | | with "J" being pronounced as "H", Juan is the |
| planning to start. | | | | "universal" first name of Filipinos just like John is for |
| One of the things that he mentioned was this unique | | | | the Americans). |
| business strategy that's quite different from what | | | | Cebu Pacific has managed to slash down fares by |
| we traditionally learn in business school. According to | | | | reducing cost on service features that most people |
| him, this strategy sorts of deviates from normal | | | | do not really care about such as hot meals etc. |
| business concepts that we hear and read from the | | | | Being involved with the International Marketing Group |
| usual management gurus. This strategy is called "Blue | | | | (IMG), I can now clearly see that they have |
| Ocean Strategy" | | | | employed the Blue Ocean Strategy in the way they |
| I was intrigued by the idea so I did a little bit of | | | | do business. I do not know if they have being doing |
| research on the subject. Blue Ocean Strategy is a | | | | this consciously or unconsciously. Instead of selling |
| corporate strategy that aims to tap unclaimed | | | | insurance products directly, IMG teaches it's clients |
| markets making competition irrelevant. The strategy | | | | and brokers the concepts of financial planning and |
| is embodied in the book entitled "Blue Ocean | | | | management. (albeit not in a very organized manner) |
| Strategy" by Professors W. Chan Kim and Renee | | | | Product is not given primary importance. The financial |
| Mauborgne and Published by Harvard Business School | | | | broker shows his client his need for financial planning. |
| Press. The authors claim that the Blue Ocean | | | | The financial broker who is well versed in financial |
| Strategy is a result of several years of study of | | | | planning concepts then introduces products that suits |
| strategic moves by over 30 industries in a span of | | | | the client needs. The untapped market of financial |
| 100 years. | | | | planning needs by the people is claimed by IMG and |
| In the book, "Blue Ocean" refers to an untapped | | | | the added cost for this value service is compensated |
| market, a market wherein there is only little or no | | | | by reducing cost with regards to training agents and |
| competition at all enabling anyone to claim the market | | | | marketing efforts since IMG works on a model that |
| for his own since it is not yet too crowded. In | | | | allows insurance and financial services company to |
| contrast, "Red Ocean" refers to a market where | | | | "outsource" their marketing and training. Other |
| competition is very high. The market is considered as | | | | insurance companies have already followed this path. |
| very crowded already since almost everybody is | | | | The trend now is that insurance agents are now |
| producing the same type of service and the same | | | | becoming financial planners. |
| kind of goods. | | | | My friend's proposed business has a similar concept |
| The Blue Ocean strategy is simply to innovate | | | | but it is something more than financial planning. He |
| something; something that makes people gives a | | | | wants to introduce a value added service to clients |
| higher value for a certain product or service. Since | | | | that will enable him to add value to existing service in |
| doing this would require additional cost, the cost that | | | | order to capture "untapped markets" However I |
| is incurred by the value added is reduced by | | | | could not discuss the details of the plan yet, but I am |
| eliminating product or service features that the | | | | sure that employing the Blue Ocean Strategy would |
| market does not really care about. | | | | enable him to succeed in the new business that he is |
| In order that this can be understood well a "local" | | | | thinking. Perhaps in the proper time I could help him |
| application must be cited. According to my friend a | | | | promote his business by writing an article on it, |
| classic example of how the Blue Ocean Strategy was | | | | probably when the final details of the plan have been |
| used here in the Philippines is the strategic moves of | | | | ironed out. However you might want to check out |
| the Gokongwei group. As we all know, the | | | | his website at [ |
| Gokongwei group owns Mobile phone company, Sun | | | | In Traditional Business strategy we talk about |
| Cellular and airline Cebu Pacific among other | | | | "crushing the competition" whereas in Blue Ocean |
| companies. | | | | Strategy we talk about "Creating new markets with |
| Since the market for mobile phones has already been | | | | little or no competition." Instead of "Strategic |
| saturated by both Smart and Globe, what Sun Cellular | | | | Planning" Blue Ocean Strategist resort to "Strategic |
| did is to create a "new market" by adding value to | | | | thinking." Instead of "cutting prices" to capture a |
| products already found in existing markets. As a | | | | market, Blue Ocean Strategy is to add "value" to |
| result of this "added" value, (By making sun to sun | | | | products and services to claim an untapped market. |
| calls free) a new untapped market was opened. It | | | | I could personally say the Blue Ocean Strategy is a |
| could be said that Sun Cellular is not competing | | | | unique strategy. Critiques may say that the Strategy |
| directly with Globe and Smart but rather they have | | | | has already existed a long time ago and that |
| raised awareness among the people to buy into this | | | | principles that are said to be unique to the strategy |
| "new market." As a result, most people now have | | | | can be found in other traditional business strategies |
| two cellular phones or two sim cards in a dual sim | | | | as well. For me, the critics may just be jealous that |
| phone. In this way Sun Cellular is not "out-performing" | | | | they were not the first ones to embody the |
| Smart and Globe but rather they have created a | | | | "strategy" in compact form. The critic's contention |
| new market, making competition irrelevant. | | | | are not valid at all since our way of discovering |
| In the airline industry, Cebu Pacific has managed to | | | | something or learning something is to build upon the |
| apply the Blue Ocean Strategy by adding "value" to | | | | knowledge that has been universally accepted by the |
| what people really want, which is to "fly." People | | | | majority. A new theory is always built upon |
| don't care about a newspaper, a hot meal or a fancily | | | | something that has already been long time accepted |
| dressed flight stewardess. What people care about is | | | | as a scientific principle or even theory. (Just like the |
| that they can "fly." In order to do this airline fares | | | | theory of relativity rest upon the foundations of the |
| must go down since this is what people care about. | | | | principles of thermodynamics, electricity, gravity etc.) |
| This in a sense allowed Cebu Pacific to tap into the | | | | Whatever the Critics have to say, the strategy |
| "untapped" market. The existing market is referred | | | | certainly is here to stay and is sure to have an |
| to as "customers who can only afford to fly." The | | | | effect on the way future entrepreneurs, managers |
| untapped market is "every can fly." This is embodied | | | | and leaders will think and do business in the years to |
| in Cebu Pacfic's advertisement "Now every JUAN can | | | | come. |