Finally, I picked up a copy of Chan Kim’s and Mauborgne’s Blue Ocean Strategy. It is a well-written book worth reading which presents lots of good (because critical) ideas about competition and strategy. I am not done reading it yet, but I started wondering how their images of the red ocean (strategy focused on competition) vs. the blue ocean (strategy based on what they call value innovation) would work with questions of foreign market entry and international business. What makes the red ocean is pretty much the traditional strategies coming out of the structure-conduct-performance paradigm – cost leadership vs. differentiation. Unless you’re in a truly global enterprise, cost leadership may be hard to achieve in international markets because of the added cost of doing business internationally. And differentiation? Well, products or services which have been designed for other environments seldomly satisfy the requirements of the local market / customers. Environmental conditions may force companies into differentation that is of a kind which they don’t want and which distracts them from strategic differentiation goals. So where does this leave the Blue Ocean Strategy? Can companies create new market space in foreign markets? In principle, why not, but I think that many companies simply lack the understanding of foreign market conditions which enables them to read markets correctly in the first place. So when there’s no understanding of foreign markets, how would companies identify those new market spaces?
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