Blue Oceans in Indian Sesame Oil Industry: A Case Analysis

By Rajasekaran, Revathy | IUP Journal of Business Strategy, June 2016 | Go to article overview

Blue Oceans in Indian Sesame Oil Industry: A Case Analysis


Rajasekaran, Revathy, IUP Journal of Business Strategy


Introduction

A quick look at the corporate situation today reveals that businesses are living in times of globalization where companies are fighting for competitive advantage, battling over market share and struggling for differentiation. In these high competitive markets, corporations are striving hard to reach or exceed their competitors. Also, a majority of the corporations today compete in mature market segments with standard market share (Chandrakala and Susheela Devi, 2013). In mature markets, it is easier to gain rivals' market share rather than attempt at enlarging the demand. But gaining competitors' market share is very costly and results in either price war or costly promotion activities. This most common market form is called 'red ocean' due to the bloody competition between the corporations. Thus in the overcrowded industries, competing head-to-head results in rivals' fighting over a dwindling profit pool. Therefore, companies which compete within such red oceans are unlikely to create profitable growth in the future (Cirjevskis et al., 2011). In this prevailing scenario, there is an emerging concept in strategic management directed at finding new business and value propositions. That new concept is termed as Blue Ocean Strategy (BOS) by Kim and Mauborgne, from INSEAD, Fontainebleau. They developed the BOS-framework which comprises a set of tools on the basis of ex-post studies of over 150 cases from 30 industries. Based on their research, they insist that companies can succeed not by battling competitors, but rather by creating 'blue oceans' of uncontested market space and making the competition irrelevant. Thus, BOS says, "Don't Compete with Rivals-Make Them Irrelevant". If one is to launch a business with a BOS and offering services that were not previously offered, there is an opportunity to create whole new demand (Kim and Mauborgne, 2004b). The creators of blue oceans, surprisingly, did not use the competition as their benchmark. Instead, they follow a different strategic logic that is called 'value innovation'. Value innovation is the cornerstone of BOS which is achieved via the simultaneous pursuit of differentiation and low cost (Kim and Mauborgne, 2004b).

In India, the branded sesame oil industry is facing the threat of high competition from other types of edible oils, change in the food habits of Indians towards consuming food from hotels and weak harvest of raw materials. There is also saturation in the sales of sesame oil. This requires the marketers of the branded sesame oil industry to look for the other utilities of sesame oil and also to find new uncontested markets and new demand for the product. In this paper, an analysis has been made to highlight the importance of BOS in the branded sesame oil industry.

Literature Review

Why BOS?

There are several driving forces behind a rising imperative to create blue oceans. Accelerated technological advances have substantially improved industrial productivity and have allowed suppliers to produce an unprecedented array of products and services. The result is that in an increasing number of industries, supply exceeds demand (Mirrahimi, 2013). The trend toward globalization compounds the situation. As trade barriers between nations and regions are dismantled and as information on products and prices becomes instantly and globally available, niche markets and havens for monopoly continue to disappear (Düsseldorf and Wubben, 2010). While supply is on the rise as global competition intensifies, there is no clear evidence of an increase in demand worldwide, and statistics even point to declining populations in many developed markets (Jussani, 2010). Given this situation, competing for a share of contracting markets will not be sufficient to sustain high performance. Companies need to go beyond competing.

BOS challenges companies to break out of the red ocean of bloody competition by creating uncontested market space that makes the competition irrelevant (Lindi and Bavda, 2012). …

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