"Blue" or "Red" Oceans: US Business and Trade with China 4219-SG127
“Blue” ocean versus “Red” ocean strategies were made distinct in a Harvard Business Review article by W. Chen Kim and Renée Mauborgne (2004), in which the “Red” ocean strategies are portrayed as competition in an existing marketplace with the aim being to beat the competition, exploit existing demand by focusing upon current customers, make the value-cost trade-off, and align the entire system of each firm’s activities with the need to make a strategic choice of either product differentiation or low cost. In contrast, “Blue” ocean strategies are portrayed as creating uncontested market space where there is no competition by focusing mainly on new customers (thereby making competition irrelevant), with the aim being to create and capture new demand, break the value-cost trade-off, by aligning each firm’s entire system of activities in pursuit of both product differentiation and low cost (Kim & Mauborgne, 2004, 2015). In other words, pursuit of a “Red” ocean strategy requires a firm to enter another company’s territory, intending to displace some of its market share by producing similar widgets then selling them at lower cost, or by producing substitute products that are different such as by looking more modern, moving faster, being lighter, made of recyclable materials. On the other hand, “Blue” ocean strategy inspires a firm to chart its own new territory by going “where no man has ever gone before” as on the USS Enterprise in the movies and television show “Startrek.” Over recent decades, Chinese firms when going international have tended to try “Blue” ocean strategies with success. This appears to be an overriding objective of China’s “One Belt One Road” (OBOR) initiative from South Asia across Eurasia to Eastern, Central, and eventually Western Europe.
In pursuit of a “Red” Ocean Strategy, a firm in any industry has to endeavor to enter another company’s territory, intending to displace some of its market share by producing similar widgets then selling them at lower cost, or by producing substitute products that are different such as by looking more modern, moving faster, being lighter, made of recyclable materials. On the other hand, pursuit of a “Blue” ocean strategy inspires a firm to chart new territory for itself by going “where no man has ever gone before” as on the USS Enterprise in the movie and television show “Startrek.” Over recent decades, Chinese firms when going international have tended to try “Blue” ocean strategies that consist of factors outlined below from relevant publications. In this way China has endeavoured to maintain a positive rather than negative foreign economic policy, steering clear of confrontation with existing markets then all the while creating new markets for itself. Sometime, presumably, companies from other countries will come to compete with China, but by then China will have moved on into new “Blue” Oceans. In this Course, we will observe industries in which China has become a leader with little to no competition, such as in “clean,” “green,” and “new” technologies, with solar power electricity generation coming to mind.
Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space. Create uncontested market space.
Beat the competition. Make the competition irrelevant.
Exploit existing demand. Create and capture new demand.
Make the value-cost trade-off. Break the value-cost trade-off
Align the whole system of a firm’s activities with its strategic choice of differentiation OR low cost. Align the whole system of a firm’s activities in pursuit of differentiation PLUS low cost.
Undoubtedly, Kim and Mauborgne identified “Blue” versus “Red” Ocean Strategies as applying to private sector companies across different industries. China’s foreign economic policy, however, encompasses a set of companies, primarily state owned, known collectively by the designation of State Owned Enterprises (SOEs), and their entry into foreign markets can be perceived as pursuing patterns overlapping “Blue” or “Red” Ocean Strategies. Some 112 SOEs are supervised by the Communist Party of China (CPC) Central Commission, known as yangqi, are discussed as recipients of recent reforms by President Xi Jinping. Many other SOEs are known as guoqi, but in either case they conduct business domestically as well as internationally, in their own name or through subsidiaries (Cendrowski, 2015; Leutert, 2015; Liu, 2015).
Type of course
Mode
Learning outcomes
This Course aims to acquaint the graduate student with the salient differences between “Blue” Ocean and “Red” Ocean Strategies then challenging the graduate student to apply this distinction to Chinese business expansion overseas, from Eurasia to Europe and Africa to North and South America, through Statre Owned Enterprises (SOEs) supervised directly by the Central Commission (yangqi), SOEs supervised at the provincial or local levels (guoqi), or private sector Small to Medium Size Enterprises (SMEs). As United States corporations routinely conduct business abroad as well as at home and Chinese enterprises do the same, neither “Blue” nor “Red” Ocean Strategies can be aligned within any geographic or political territory, or any industry, exclusively. Either “Blue” or “Red” Ocean Strategies may be found anywhere.
Assessment criteria
This course will be assessed primarily by your Term Paper clearly of publishable quality, plus your presentation to the Class using PowerPoint slides. Also, a Midterm Examination to provide progressive feedback. If each criterion is used, the Course will be evaluated as follows:
10 percent Class Attendance and Participation
20 percent Midterm Examination
20 percent Class Presentation
50 percent Term Paper with Documentation
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Additional information
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