The red ocean approach – beating the competition
The red color in the ocean is blood. A red ocean full of sharks allegorizes the battle-field of eat and be eaten in an over-crowded playground with limited growth opportunities and shrinking profit margins. Market predators are fighting each other for the same prey.
Products and services in the red ocean are frequently treated as commodities. To beat the competition in existing markets requires a competitive advantage and pricing. Otherwise, to enter the market with an unknown, untried, and untested product is an uphill battle – aka. red ocean trap.
The breakdown of the competitive situation in the red ocean is typically made on five factors: Competitive rivalry, the bargaining power of suppliers and customers, and the threat of new entrants and substitute products. This creates a kill zone, an area entirely covered by direct and effective fire, between the market whales.
The blue ocean approach – the nondisruptive creation of new market spaces
The blue ocean shift stands for untapped, untainted, uncontested, and untouched markets, which does neither need to be an innovation nor a niche strategy. At least for a certain time, blue oceans are not easy to imitate by others and, therefore, competition is low and profitability can be high. To discover and to conquer blue oceans is, therefore, a promising and profitable strategy.
The blue ocean shift is pretty much the opposite from the strategy to disrupt existing markets. Red oceans are not converted into blue oceans but left alone with the competition.
The blue ocean strategy – finding the key to a blue ocean shift
To develop a blue ocean, the action framework consists of four considerations:
- Which factors should be reduced well below the industry ‘standards?
- Which of the factors that the industry takes for granted should be eliminated?
- Which factors should be raised well above the industry’ s standards?
- Which factors should be created that the industry has never offered?
The blue ocean strategy is to look across alternative industries, strategic groups within the industries, the chain of buyers, complimentary products and services, and more.
The books #BlueOceanStrategy (2005) and #BlueOceanShift (2017) provide a few more details and considerations. #BlueOceanAdvantage