Blue Ocean

In a book recommended by one of my friends Paul, I found some key to how I should change my life. The book is called Blue Ocean Strategy and what does it mean, you may ask me. A blue ocean is a direct opposite of a red ocean. In a typical red ocean, companies compete bloody, slashing prices and offering roughly the same services to attract more market value. In a blue ocean, there is no competition, as it is unchartered water. It's essentially the same as the quote, "Take the road less taken, as it will lead you to new discoveries."

Red oceans are typical. Companies fight amongst each other like no other way. If today the in thing is donuts, I can assure you, in a single lane of shophouses, at least 3 competitors will be together and the whole singapore will have more than 10 unique companies trying to sell the same proven donuts at roughly the same price. Additional companies joining the fray will only cause the saturation of the market and as oversupply occurs, the whole idea about donuts will fall apart, taking along it, the newly established companies. A history of which can be seen in Singapore alone, as with Bubble Tea, Portuguese egg tarts, Apple strudels, Coffee buns, and cake shops. These low entry entities present no barrier to anyone willing to step in and thus, overcompetition occurs.

It is therefore clear that we should all look for blue oceans. The question would now be how to find the blue oceans. If you differentiate from let's say the donuts business and make more varieties, you are still not creating a blue ocean. You are still fighting in the Red ocean, trying to gain more market share. Such a battle is tiresome and meaningless. You might win, but the battle will be a long and worrisome one. So how may I create a blue ocean? A few companies have effectively done it. Think about a hotel business and big names like Hilton or Fullerton will come to your mind. They have effectively competed based on their luxurious suites and each seek to gain more market share by providing a better experience. The market is saturated.

One company I feel that has explored and found a blue ocean would be La Quinta Inns. What is so different about this hotel? The big hotels compete based on price and they attract big customers like businessmen and tycoon, who are able to pay for the luxurious rooms. They have full suites with full restaurants and wedding rooms and recreational machines and purposes. For La Quinta, It did not model itself after them. It took out wedding rooms and other entities that did not earn money for it and made it into a budget hotel away from the market of the big hotel. As a result, La Quinta rose fast to become a million dollar enterprise.

An additional issue I picked up from the book was about competition between alternatives and substitutes. Firstly I have to define substitutes and alternatives. Substitutes are products or services similar to one another. You could choose to watch the movie Spiderman or Superman, or even The Devil Wears Prada. They are all substitutes for one another. Alternatives are of higher level. People watch movies for entertainment so people could effectively watch a movie because of boredom or sing in KTV or go into a lan shop to play some games to relieve some boredom. These are alternatives.

Commonly it is regarded that if I own a coffeeshop and the other guy opens one across the street, he would be regarded as my competitor. If the other guy opens a supermarket selling litre fruit juice in packets, I wouldn't see him as my competitor directly. That is but a narrow side of the view. There can exist competition between alternatives. The reason the customer drinks is due to his thirst. He could give his business to the supermarket over you even if the supermarket is not directly competing with you. With such knowledge, competition is really complex. Instead of thinking, how can I gain more market share from commonplace competitors, We can start to think, how now can we gain more market share that we commonly leave out due to perceived market barriers.