People always get confused between the Blue Ocean and Red Ocean strategy however, this article will eliminate your queries with easy applications and examples. The term Blue Ocean and Red Ocean was firstly coined by Two people Chan Kim and Renee Mauborgne who created and explain the market universe in 2004. The Blue Ocean strategy is symbolic of those industries which are no longer exist in today’s environment. The origin of the Blue Ocean strategy is to create “value innovation”.
On the other hand, the Red Ocean strategy is completely opposite of the Blue Ocean strategy which refers to those industries that can be found or exist in the current market scenario. Both of the strategies are well defined with limitations and governed by the competitive rules of the market.
Red Ocean Strategy
The term Red Ocean Strategy is used as a metaphor for sea fish that eat each other for survival as the color of the Ocean becomes red with fish blood. The purpose of the Red Ocean strategy is to go aggressive against the competitors to obtain a high market share. However, the strategy faces challenges in increasing market space where the competitors are getting crowded at which the profit and market growth are limited.
The organization tries to gain a sustainable competitive advantage through competitor analysis to provide better value. The outlook towards the market is more traditional and conservative to compete against competitors. Hence, the strategy equips companies and organizations to focus on existing customers and offer better services rather than creating or attracting new customers.
Key Points of Red Ocean Strategy
- Find suppliers who are competitive and reliable
- As the market space is already saturated, companies follow to buy or beat new competitors to eliminate the threat
- Organizations diversified the marketing mix to avoid threats from alternatives
- Provide better or add value to the customers
- Find the weak point of competitors and attack.
Blue Ocean Strategy
The Blue Ocean Strategy focuses on establishing an unknown market space that currently has no market threat or competition. The blue ocean marketing creates the demand instead of fighting over it. The marketing strategy provides plenty of opportunities to build rapid growth and enhance profitability. Contrasting Red Ocean marketing, the blue ocean strategy faces no threats or competition as the rules of markets are still not set or established. The strategy creates its supremacy that has not discovered deeper meaning and possibilities. Hence, the blue ocean strategy represents numerous possibilities to be explored.
The Blue Ocean Marketing strategy focuses on modern values that apply to which organizations have an opportunity to acquire value innovations by adding value for customers and the organization itself. The innovation strategy can be acquired for developing products, services or distribution, but it must create value for the market. A blue ocean marketing strategy is more successful and efficient to create a strong brand entity which is not that easy in a red ocean strategy. An important feature of the blue ocean strategy is not looking toward applying conservative or traditional ideas.
Key Points of Blue Ocean Strategy
- Find suppliers that can be flexible with required changes
- Raise the bar for new entrances to maintain dominance in the market
- The market is new, so no threat from substitute
- Create a set of benchmarks and positive relationships with customers
- The high growth will make you big fish in the market, hence no worries about competitors at the start
The following are the basic differences between the Blue Ocean and Red Ocean strategies.
|Blue Ocean Strategy||Red Ocean Strategy|
|Establishing a new market space||Compete with the existing market|
|Make the idea of competition irrelevant||Overcome or beat the competition|
|Create a new demand||Manipulate or exploit the existing demand|
|Break the cost trade-off||Build the cost trade-off|
|One company creates a monopoly by dominating the whole market||Multiple companies compete against each other in the existing market|
|Company has a choice between cost and differentiation strategy||Company to pursue cost and differentiation strategy|
|Redefine Buyer Segment||Customize services for existing buyer segment|
|Examples: T-Ford, General Motors, Netflix, Canon||Examples: Samsung, Emirates airlines, Coco-Cola|
Greatest of All Time Examples
Blue Ocean Strategy
- Ford T Model: The Ford company created an evolution in the automotive industry by becoming the first mass producer of the T model in 1908. The market was created by selling cars at high prices so that only rich people could afford and buy them. The innovative design with fashionable alloy steel gave strength to its superior look despite being lightweight.
- General Motors Car: General Motors (GM) created the Blue Ocean Strategy in 1924 for producing fashionable cars.
- Japanese Autos: The fuel-efficient, small and dependable cars produced by Japanese Automakers that opted Blue Ocean Strategy during the mid-1970.
- Chrysler Minivan: Similar to Minivan, Chrysler created a new division of automobiles in 1884 which were comfortable to drive with too much space.
Red Ocean Strategy
- Samsung TVs: The company opts Red Ocean strategy to deal with existing competitors such as Sony, LG and Panasonic, and Grundig. The company offered high-quality definition TVs with flat designs.
- Apple: Same as Samsung, Apple also used the red ocean strategy in 2007, when the mobile industry was highly competitive. However, people do not agree as they think Apple opted blue ocean strategy as they invented a new market. During that time, Nokia was the big fish with more than 60% market share and other big competitors such as Sony, Motorola, and Alcatel were also involved. Hence, Apple designed a better smartphone with a touch screen, user experience iOS version, quality camera and other services to become ahead of competitors.
- Bose: The company sells audio equipment that successfully beat the other giant companies such as Panasonic ($70 billion), Sony ($76 billion), Samsung ($202 billion), and Apple ($369 Billion). Bose focused on providing quality audio equipment that diversified with the new range of speakers, Bluetooth, headphones, microphones, wireless audio, etc.
The last but not least, both strategies are completely opposite in terms of ideology, market strategies, planning and competitors. The Blue Ocean strategy is more innovative and tries to identify the unknown market to create a monopoly and earn huge profits. While the Red Ocean strategy applies to the current market scenario the way numerous companies compete against each other for increasing market share and customer attraction.
If you want to learn more about marketing strategies, check out the case studies page to learn successful marketing strategies adopted by marketers in the world. Comment your thoughts on both of these strategies and let us your viewpoint. Share the article on social media channels and follow us on Instagram to stay connected. Stay Tune!
Kim, W.C. and Mauborgne, R., 2014. Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.
Kim, C., Yang, K.H. and Kim, J., 2008. A strategy for third-party logistics systems: A case analysis using the blue ocean strategy. Omega, 36(4), pp.522-534.
Rafique, M., Evans, R.D. and Nawaz, M.T., 2015, November. Absorptive capacity: a hub of Blue Ocean and red ocean strategies and capability transformation in innovative business environments. In 2015 2nd International Conference on Knowledge-Based Engineering and Innovation (KBEI) (pp. 60-65). IEEE.