Issues in a down economy: blue oceans and new product development
| DOI | https://doi.org/10.1108/10610420910972819 |
| Pages | 292-296 |
| Published date | 17 July 2009 |
| Date | 17 July 2009 |
| Author | Dennis Pitta |
| Subject Matter | Marketing |
Case study
Issues in a down economy: blue oceans and
new product development
Dennis Pitta
University of Baltimore, Baltimore, Maryland, USA
Abstract
Purpose – The purpose of this paper is to describe a conceptual strategy approach that can be applied to product development.
Design/methodology/approach – The case describes an approach to avoid dangerous competition and find new uncluttered market space. The
methodology is illustrated by a new start up.
Findings – The paper provides an application of the blue ocean strategy approach to developing new products. Using the approach, companies can
restructure their product and service offerings to serve new customers and escape from their industry competitors. Their results offer implications for
new product development and management teams as well as senior management.
Research limitations/implications – As in all case studies, the specific conditions found in one organization may not be found more generally in
others. Readers are cautioned that the conclusions drawn in the case may have limited applicability.
Practical implications – The case depicts the process that firm can use to innovate.
Originality/value – The case describes how a competitive strategy, focusing on customers can transform a company and its products.
Keywords Economic depression, Product development, Competitive strategy, Customer satisfaction, Customer retention
Paper type Case study
Conventional wisdom asserts that starting a company or
developing a new product for release during a down economy
is a risky proposition. More precisely, the gut reaction of many
marketers is to cut back, suspend initiatives and husband
cash. Today no domestic homebuilder continues to develop
properties that are unlikely to be sold. The real estate news
cites numerous townhouse and apartment projects that have
been suspended until the market rebounds. Given the state of
the global banking business and the projected scarcity of
financing, the rebound will probably not come quickly. Many
other products from automobiles to electronics have suffered
declining demand recently. Demand can decline naturally as
it does in the maturity and decline stages of the product life
cycle. It can also decline as a result of an acute problem like a
market crash. The results are the same; the decline in sales
increases competition.
Over the years, business schools emphasized the
importance of creating barriers to entr y even in non-
monopoly markets. The ideal, product differentiation, was
the goal of most product and services in monopolistic
markets. If consumers value the differences, the higher the
degree of differentiation, the greater the freedom from
competition. The current economic conditions stress almost
all marketers. The acute drop in spending means fewer active
consumers and each competitor stretches to try to serve them.
Many industries suffer from crowded market space. The
number of competitors and the intensity of competition
increase price competition and reduce product differentiation.
In essence the lack of demand makes products in the
marketplace more like commodities. As a result, profits are
squeezed and some competitors are forced from the field of
competition. The situation has been described by Kim and
Mauborgne (2005) as being a red ocean. Red oceans are areas
of intense competition that are analogous to blood-stained
shark-infested waters. Competition consumes the possibility
of profits and the probability of success.
Instead of the unhealthy red ocean, the authors describe an
idyllic market place, the blue ocean. Blue oceans are areas free
of competitors. They are market spaces created by companies
to avoid competitors. They offer the possibility of profits and
success and great customer satisfaction. They state
emphatically that companies can control their field of
competition; they can create new demand by changing the
basis of competition. To do so they must innovate the
established business models. That may mean destroying
models that have been successful over time and discarding
assets that once were very valuable.
The heart of the blue ocean approach, as it is in marketing
and product development is customer knowledge. As markets
develop and spawn competition, market space decreases and
the average distance from the consumer increases. That is to
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1061-0421.htm
Journal of Product & Brand Management
18/4 (2009) 292–296
qEmerald Group Publishing Limited [ISSN 1061-0421]
[DOI 10.1108/10610420910972819]
The author would like to thank Ms Marilyn Gil, the chief fashion officer of
Clothing Vault for her invaluable information and support.
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