The Blue Ocean strategy proposed by Reene Mauborge and Chan Kim enables local and international firms to proactively remain focus on creating strategic market space for their products and services, surpassing the comfort of the current market demand, and creating a permanent strategy for focusing on the bigger picture. The Blue Ocean strategy is ideal for surviving the competitive forces in the market since it empowers firms to adopt strategies such as differentiation, cost leadership, and focus to ensure that the products are more visible and targeting the potential customers (Kim & Mauborge, 2015).
Irrespective of the size of a firm, the Blue Ocean strategy provides a framework for creating or modifying an existing space in the market for their products. In addition, the model is proactive in incorporating the human intellect with the other mechanisms of doing business as part and parcel of the decision making (Kim & Mauborge, 2015). This means that the strategy empowers the decision-makers in the business environment to be creative and avoid the things-as-usual strategy in executing their mandate in the best interest of the firm. The Blue Ocean strategies are expounded in the next section of the paper.
Toyota’s Cost Leadership Strategy
Toyota Motor Corporation has its headquarters in Aichi, Japan with several international plants in countries across the globe. It is the largest vehicle manufacturer in the world with a capacity to produce more than ten million automobiles each year (Toyota Motors Corporation, 2016). The company has used the cost leadership strategy to benefit from firm-specific advantage, location-specific advantage, and internalization advantage due to the very low cost of production, thus the low cost of final products.
The company has penetrated the global automobile industry through its high quality and very affordable cars. At present, the company controls more than 10% of the global automobile industry since its cars are classified as luxurious pocket-friendly automobiles (Cantwell & Narula, 2009). The low-cost price tag on its automobiles is associated with having the lowest cost of production since the company has initiated efficiencies in each production unit as a business strategy.
Toyota Company has adopted the cost leadership strategy to improve its efficiency through streamlining operations. As a result, this venture has developed a cumulative experience, optimal performance, quality assurance, and is in full control of their operational chains. In order to cut down the cost of service delivery and marketing, the company has embraced modern technology in its production, logistics, and customer care (Cantwell & Narula, 2009). The company has entered into a partnership with car dealership agents rather than engaging its resources in obtaining and selling to its customers. As a result, the general overhead cost of operation has been reduced substantially.
Besides, the company has been very successful in engaging in foreign direct investment in different regions across the world since the cost of production in these regions such as Australia, Europe, and America is cheaper than the cost of producing at home and the exporting (Cantwell & Narula, 2009). The initial motive for investing in these regions was informed about the existence of cheap and abundant raw materials such as steel, cost of power, and other production requirements (Cantwell & Narula, 2009).
In addition, the company has introduced a series of efficiency monitoring systems such as performance valuation, target management, and franchise business approach, which has greatly reduced the cost of product, thus cheap automobile. These ventures aim at enabling the company to optimize profits through efficiency in sales, benefits from economies of scale, and use of company resources at the least possible cost while maintaining quality. The cost leadership strategy adopted by Toyota is in line with the Blue Ocean principle of fusing cost effectiveness and high value for customers who demand cheap cars.
Telsa’s Differentiation Strategy
Telsa Motors was founded in the year 2003 and has expanded its region of operation beyond the traditional US market due to its unique product differentiation strategy. The strategy has been implemented in the company through creation of electric and hybrid cars for customers in the middle class and high class market segments. Tesla Motors Inc. creates unique brands that remain rivaled in most parts of the Americas and Europe.
Many firms strive to create an organization dealing in such products, but rivalry from other gasoline vehicles normally acts a setback to progress. Tesla Inc. has a competitive brand name that earns it the good will of competitors such as Toyota and Nissan that contract the firm to customize their vehicles into battery-powered vehicles (Witcher & Chau, 2010). The competitive technology makes the company improve its products and services as the investment capital keeps increasing.
Strengths that place the firm at the top include an established brand name because Tesla provides affordable high-tech products to the target population. Unlike companies that target the rich and sophisticated customers, Tesla decided to target the middle class in the new corporate strategy of 2009 (Tesla Motors, 2016). When all employees and supervisors adhere to the policies of the corporate strategy, it becomes very difficult to fail. This enables the company to diversify its products as part of portfolio balance strategy. For instance, the company has diversified hybrid, pure electric, and customized cars for different customer segments.
Tesla Motors decided to take an initiative in order to manufacture and market electric vehicles by customizing the machinery to consumer needs. The American firm has experts working in different departments including car assembly, modification, design, and overall production. In most cases, the company acquires cars from car manufacturing firms in order to design them in a way that suits the needs of the target consumer population. The most obvious objective for the firm is to support green business as a product differentiation strategy. Avoiding gasoline use in cars reduces release of car exhausts into the atmosphere.
Environmental conservation is extremely important, especially with an increase in the cases of climate change and extreme weather (Tesla Motors, 2016). Carbon gases and other greenhouse gases always deplete the ozone layer. This enables penetration of direct sunlight, causing cases of skin cancer and genetic modification in the natural ecosystem (Nexis, 2015). Fortunately, the creation of hybrid and electric cars by the company was meant to differentiate these products as being green and offering customers the opportunity to drive without polluting the environment.
It is possible for a company to produce differentiated goods or services, yet fail to achieve much success. However, the differentiation in the case of Tesla Motors has been effective to the extent that it has given the company great success in its marketing. One of the major reasons why this differentiation has been successful is electric nature of the cars it retails. As mentioned earlier, many people prefer green automobile products. This has been an advantage to Tesla Motors. The company has been involved in campaigns that advocate for clean emission and fund groups that are engaged in such campaigns. Another factor that has strengthened its position is the many outlets that it has opened across nations (Tesla Motors, 2016). This helps the company expand its consumer base, increase its sales and profitability.
As suggested by the Ocean Blue strategy, companies might increase their competitive advantage through entering the uncontested markets (Kim & Mauborge, 2015). Tesla Motors has utilized this strategy to create high-end and middle-end electric and hybrid cars to appeal to different customer segments that are not served by other manufacturers. In fact, the company has revolutionized the electric car market through implementation of the modern technology in automobiles that does not necessarily result in high pricing tag.
Rolls Royce Focused Strategy
Founded in the year 1904 in Manchester, UK, the Rolls Royce Motor has focused its market to the high-end customers by manufacturing expensive and classy car to super rich clients. The Rolls Royce products are made and sold by company through their distribution stores across the world. The company is well known for its unique targeting, segmenting, and positioning of the Royce brand product, which has helped it to maintain its position as a leader for more than five decades. The distributions stores double up as the selling agents for the Rolls Royce brand. It has often been credited for making automobile a popular fashion statement for the high-end class. The company is also credited for making the first electric high-end cars that are only distributed by authorized dealers (Daft, 2012). Today, Rolls Royce is the largest luxury automobile maker and distributed in the world.
The company specializes in niche marketing by focusing on utmost premium brand quality that customers demand. The strong market position has positioned Rolls Royce to meet customer demand since it has a resounding knowledge of the global consumer trends. The high-end focus has enabled the company to target customers within the 1% super rich global population (Cantwell & Narula, 2009). As a result, the company does not need to spend a lot on advertisement and promotion since its customers are known and make purchases based on the trend.
In addition, the company has been proactive in sponsoring global events such as luxury car shows to tap into the 1% target population (Phyper & MacLean, 2009). In fact, Rolls Royce has been able to maintain visibility and global leadership position through limiting the number of customers who can afford its products since clients associate them with class statement (Rolls Royce, 2015). At present, ownership of the Rolls Royce automobile gives customers the opportunity to belong to the high-end private club that only admit the super rich customers.
Summary
From the above analysis, it is apparent that application of the Blue Ocean strategies depends on the scope and target market that a business seeks to penetrate. Specifically, the focus, cost leadership, and differentiation strategies have worked perfectly for the Rolls Royce, Toyota, and Tesla Motors. However, Toyota’s cost leadership strategy has been the most successful. The company has sold more cars than its competitors due to competitive pricing, as a result of low cost of production. Rolls Royce’s focus strategy takes the second position since it has been able to retain its unique market, though with little market expansion. The differentiation strategy adopted by Tesla takes the third position since concentration on electric cars has narrowed the company’s market, despite the fact that more that 80% of automobiles in the market are using gas.
References
Cantwell, J., & Narula, R. (2009). International business and the Eclectic Paradigm: Developing the OLI framework. New York, NY: Routledge.
Daft, R. L. (2012). Management. Mason, Ohio: South-Western Cengage Learning.
Kim, C., & Mauborge, R. (2015). Blue ocean strategy. Boston, MA: Harvard Business Review Press.
Nexis, L. (2015). Business and management strategy. Chicago, Ch: Glo-Bus Spring.
Phyper, D., & MacLean, P. (2009). Good to green: Managing business risks and opportunities in the age of environmental awareness. Hoboken, NJ: John Wiley & Sons.
Rolls Royce. (2016). Explore luxury. Web.
Tesla Motors. (2015). Electric era. Web.
Toyota Motors Corporation. (2016). About us. Web.
Witcher, B., & Chau, V. (2010). Strategic management: Principles and practice. Alabama, Al: Cengage Learning.