Companies on the lookout for 'blue ocean'

Chinese companies should make structural reforms and innovate to find "blue ocean" - untapped markets - and produce products that are different and low-cost, rather than compete in the "red ocean", or saturated markets, says W. Chan Kim, co-author of Blue Ocean Strategy.

The book by Kim and Rene Mauborgne of the Insead business school, describes how successful businesses capture uncontested market space and render competition irrelevant.

Blue oceans mean clear sailing; red oceans have fierce competition.

Kim says most Chinese companies adopt a low-price strategy at the beginning because of the cheap labor available in China. In the past it was common for them to enter global markets on the basis of price.

But nowadays that advantage is dwindling, as there are other places - including some in Southeast Asia - where labor costs less than in China.

Kim was giving a keynote speech in late October at the annual conference of the Harvard Business Review in Beijing, where leading economists and entrepreneurs from China and abroad thrashed ideas about how technology and new business models affect the business world.

A key topic was the rising generation of young consumers overseas who like to shop online, and how China faces a growing challenge of ensuring its products meet their requirements in both quality and design.

Kim says he has been observing China for many years, and the blue ocean strategy for China is to combine differentiation and low-cost to build a new market, rather than fight with current competitors.

He says that Chinese companies are finding more blue ocean in which to succeed. Tencent, Alibaba, and Huawei are representative of companies that have realized geometric growth by creating new markets and producing products that are both low-cost and distinct from the mainstream.

Tong Fuyao, senior vice-president of Lenovo Group, the world's largest maker of personal computers, says the company now offers more than 500 million pieces of equipment in 160 countries and regions, and it is actively working on a blue ocean strategy.

While maintaining its main PC business, Lenovo is developing a mobile phone business. But the most promising blue ocean, according to Tong, is big data and cloud services.

"The global PC market has been decreasing steadily for eight quarters," he said. "Lenovo makes personal computers, but in the past few years, we have seen that almost everyone buys a smartphone first, then a tablet, and then a PC. So we want to make innovations based on users' needs."

Tong says that for Lenovo, the blue ocean is to develop the next generation of intelligent terminals, to combine the needs of users together with equipment, big data, the Internet and customer service.

Zhang Jianqiu, CEO of Chinese dairy giant Inner Mongolia Yili Industrial Group, says Yili sent about 100 million products to consumers every day in 2015, and it holds the largest share of the Chinese dairy market. But it is constantly looking for blue ocean.

Zhang says that even though Yili is a traditional company, it has been embracing the internet age, new technology and new concepts. It has built up some big-data platforms, which will help collect and analyze consumer habits on the internet, so as to better understand their needs and habits.

"This large amount of data will help us analyze consumers' different demands for different kinds of dairy products. The analysis will help us innovate with all links in the production process, from milk sources to R&D and marketing," he says.

chenyingqun@chinadaily.com.cn