Red Ocean V/s Blue Ocean Strategy

By: Ayesha Shahid I.D.No.: 9298

What Is Red Ocean?

Red oceans are all existing industries - the known market space. In the red oceans, industry boundaries are defined and accepted.

Companies try to outperform their rivals to grab a greater share of existing demand.
As the market space gets crowded, prospects for profit and growth are reduced. Cutthroat competition turns the red ocean bloody. Hence, the term red oceans.

What Is Blue Ocean?

Blue oceans denote all the industries not in existence today.- the unknown market space, untainted by competition. In blue oceans, demand is created rather than fought over.

There is ample opportunity for growth that is both profitable and rapid.
It is an analogy to describe the wider, deeper potential of market space that is not yet explored. Like the blue ocean, it is untouched, vast and deep in terms of profitable growth.

Red Ocean
Compete in existing market.

Blue Ocean
Create uncontested market space.

Exploit existing demand.

Either differentiation or low cost. Segment the market. Strategy execution follows formulation. Beat the competition. Fight to win.

Create and capture new demand.

Differentiation and low cost. De-segment the market. Strategic alignment.

Competition is irrelevant. Win without fighting.

Red Ocean
Focus on existing customers. Focuses on adapting to external trends as they occur. Competitive rules of game known. Market competing strategy.

Blue Ocean
Focus on non-customers. Participates in shaping external trends over time. Rules of games waiting to be set. Market creating strategy.

The only way to beat the competition is to stop trying to beat the competition.

Value Innovation

COST

VALUE INNOVATION

Buyer Value
The simultaneous pursuit of differentiation and low cost

Ways To Create Blue Ocean

One is launch completely new industries, as eBay did with online auctions. It is more common for a blue ocean to be created from within a red ocean when a company expands the boundaries of an existing industry.

Advantages of Blue Ocean

It captures the current state of play in the known market space. It tells where the competition is currently investing. It indicates the factors the industry currently competes on in product, service and delivery. It tells what customers receive from existing competitive offerings on the market.

Four Action Framework

Eliminate Which of the factors that the industry takes for granted should be eliminated? Reduce Which factors should be reduced well below the industrys standard? Raise Which factors should be raised well above the industrys standard? Create Which factors should be created that the industry has never offered?

Example of Red Ocean

Brands are generally becoming more similar for major product and service categories, and as they are becoming more similar people increasingly select based on price.

Examples of Blue Ocean

General Motors

The Megaplex

Rising Imperative of Creating Blue Ocean

Supply is exceeding demand in most industries. Global competition is intensifying. Accelerated commodization of products and services. Increasing price wars. Shrinking profit margins.

At Present
The playing field is dramatically imbalanced in favor of tools and analytical frameworks to succeed in red oceans. Red Oceans will continue to dominate companys strategic agenda even as the business imperative for creating Blue Oceans takes on new urgency.

To move to the Blue Ocean we have to first make sure we can live without the little part of Red Ocean that we have staked out.