Imitation: The a danger of a blue ocean strategy
A key problem with a blue ocean strategy, where a firm develops a unique way of competing, is that other firms will enter or encroach on your market. While it may be possible to identify a space free of competition, if other firms can see your success and imitate it, then suddenly your blue ocean risks turning red. What may start out as a particularly profitable market space – free of competition – risks suddenly becoming a lot more competitive.
Considering entry barriers and mobility barriers
When considering imitation of your blue ocean space there are two threats to be aware of:
- Existing firms adjusting their operations to reposition themselves
- New firms entering the market to compete in your space
The role of mobility barriers in protecting a blue ocean
Mobility barriers refer to the challenges that existing firms would have changing position and thus moving into your blue ocean. Some examples of mobility barriers include:
- Existing commitments of resources that are difficult to re-configure
- Required resources and capabilities that can’t be obtained
- Existing brand reputation for specific offerings
- Existing long term customers that would be lost if the firm were to change
The role of entry barriers in protecting a blue ocean
Likewise, entry barriers protect a blue ocean strategy, however, this time from new firms entering. A key difference between new and existing firms is that new firms do not have a prior legacy to worry about. Companies also don’t have an awareness of new firms – while you may know who your competitors are, it is possible for new firms to enter that you had no prior knowledge of.
Unlike existing firms, new entrants may have a challenge building up the resources that are necessary to compete. While existing competitors already have some resources, new firms do not.
Some specific entry barriers that may protect a blue ocean strategy from new entrants include:
- Patents and legal protections
- Economies of scale
- Learning effects
- Difficulties in accessing distribution channel
- Network effects
- Established customer or supplier arrangements, and other switching costs
Consider your underlying resources
Underpinning whether firms are able to imitate your position is the resources that your firm has. If your ability to compete in the blue ocean is based on valuable, rare, hard to imitate resources, then this increases the difficulty other firms would have in competing. Consider both the challenge that new firms and existing companies would have in acquiring your resources. The VRIO framework is one approach to systematically consider your resource position and value the likelihood that other firms will be able to imitate your position.