Blue ocean versus red ocean strategies in the field of Public Transport. Competing for the market instead of in the market
La Habana, Cuba.
Iattended a series of talks at the ISOM Business School on internationalisation for SMEs and was listening to some explanations on Blue and Red Ocean strategies. What I heard reminded me of something I had read by Dr.HoracioKrell, Founding Executive of ILVEM dealing with the same topic and have included this below for those of you still not au fait with the concept:
Red and blue ocean thinking involve different strategies on how to act in different competitive markets and to know how to create new demand for good ideas. Red Ocean describes high levels of competition, a space where everything achieved is done so at the expense of others, either by dropping prices or improving quality. Blue Ocean thinking is based on the idea of Red Ocean through reaching unchartered waters through the implementation of new ideas. In Red Ocean thinking there is the rule of competition; whereas in Blue Ocean Thinking, there is no competition.
The voyage into the Blue Ocean begins in the Red Ocean and must be made using one’s imagination. Once there, you no longer fight to survive, the onus is on enjoying yourself and growing quickly. The aim is to separate the important from the urgent, so that the strategy includes improvisation and thinking on your feet. Blue Ocean Thinking does not offer what is demanded at the present time, rather something better. In the Red Ocean we find the commonly used ideas from well-known, defined and accepted products or spaces. As more and more competitors flood the market, profits fall and the struggle for market-share heats up. The Blue Ocean is virgin territory, unexplored and offering high-levels of returns for those prepared to steer their ships towards these waters. This represents what it could be, the unknown. In their waters, the demand is created
And so, in line with the ideas expounded in a previous post entitled “Is Public Transport a Second Class Good?” I have continued to dwell on the topic and believe that we have to consider public transport in terms of Blue Ocean Thinking, running without competition, and this has been achieved through the use of what are called “reserved platforms” such as metropolitan railways, tramways or bus networks. Yes, indeed, the buses, a fitting means of transport for current investment levels, which continues to stretch its capacity, and is can bring in more demand than one would expect. Line 27 of the Madrid Bus Network has carried, from time to time, as many passengers as all of the Light Rail Networks in the Community of Madrid together Indeed, Line 27 in Madrid (well known for running from the rail-hub at Atocha up to Plaza de Castillaalong the renowned Paseo de la Castellana) handling around 80,000 passengers daily, more or less the same as all of the Light Rail Networks in the Community of Madrid (Las Tablas, Boadilla, PozueloandParla).
Another issue I wanted to touch on regarding public transport arose upon my return from a congress in Oxford when the discussion turned tocompetition in the market and for the market itself. The Anglo-Saxon model has a long-standing supporter of deregulation, the total freeing up of the transport market. Let us look at this model operating for the buses. It means that if a company wants to provide a service in a corridor in a city, they only have to prove they have sufficient solvency to do so and a licence is issued to them.It is overwhelming to see how in Latin America “truck-men” fight to board possible passengers. There is no better definition of competing IN the market Then, there could be several companies operating the same line, or a similar route, and, in short, attracting the same demand, in other words, a red ocean. Taken to the extreme it is a model that can be seen in many Latin American cities, where a guy with a truck operates, someone else turns up with an omnibus and starts up a route. It is impressive to see how they overtake each other at breakneck speed in order to attract possible passengers who stick out there hands in any part of the city (not always necessarily at bus-stops).There is no better definition of competing IN the market.
The most widespread European model is to compete FOR the Market, being a level above regulated markets though keeps the idea of competition. An example of this in our cities are the tenders offered to private bidders on public transport projects. Companies “fight” for their share of the market, with the winner being awarded with the contract for a fixed duration, previously decades, but now reduced to a maximum of 20 years thanks to changes in the current legislation. I personally like this formula, though would reduce it even further to ten years maximum, thus meaning the awardee would have to bear in mind the aspect of competition when the tender comes up again a few years later. In the meantime, we would benefit from more ordered and efficient means of public transport. That is my outlook.
Over to you then, dear Reader, tell me what your views are on regulation or deregulation in the transport sector, or indeed anything you feel worth mentioning on the topic in hand.