Porter’s Five Forces Model versus A Blue Ocean Strategy
Porter’s Five Forces Model, provided by Michael Porter, is an external environmental analysis tool for a specific market. This model emphasizes that in any existing industry, there are five competition forces: threat of new entrants, power of suppliers, power of customers, threat of substitute products, and intensity of competitive rivalry. In addition, these five forces can influence and determine the profitability of the enterprise. Using the five forces model, one can analyze the industry attractiveness and the level of competition, which can then help the company to develop the business strategy. In the real world, strategic analysis and strategy formulations are important for company to gain the profitability. For example, IKEA focuses on operating efficiently and developing new product continuously for their business strategies. Also, the Five Forces Model has helped IKEA to maintain its low cost and obtain the huge profitability in the furniture industry over the years. The Blue Ocean Strategy takes the view that innovation, innovation that creates new market space, taps into unsatisfied consumer demand that finds uncontested market space in the hope of finding a blue ocean. A blue ocean exists where no firms currently operate, leaving the company to expand without competition. The core strategy is the value innovation, which means that the company should create new demand and make the competition irrelevant. In short, the company needs to pursue unique product or service differentiation and low cost simultaneously, in order to capture the untapped market. Moreover, it is significant to create new value that can rebuild the buyer value elements and capture new demand.
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