From establishing a brand to acquiring customers and then retaining them, there are several challenges that businesses have to go through. As such, they have one of the two choices – to innovate and survive or be phased out and eventually die. This is why more and more new companies are devising strategies that can either help them acquire a significant market share. This can be done by growing aggressively in an already established market space with a reliable proof of concept or creating a new, untapped market. Technically, these are known as the Blue and the Red Ocean Strategy. Here’s a comparison between the two strategies
Red Ocean Strategy Definition
Using the oceans as an analogy, professors of strategy at INSEAD, Renée Mauborgne and W. Chan Kim devised the Red and Blue Ocean Strategy in their book ‘Blue Ocean Strategy’. According to the professors, the red oceans represent all the industries which exist today. This is the known and familiar market space wherein companies belonging to the same industry attempt to outperform each other and grab a larger share of the market. With cutthroat competition being the fundamental feature of this industry, the ocean turns bloody and red, thus giving birth to the term Red Ocean Strategy.
Blue Ocean Strategy Definition
Unlike the bloodied, red oceans, blue oceans represent the industries and companies that are not yet in existence. It denotes the untapped market potential. This is an unexplored market space which is not yet tainted since the competition does not exist. Like the beautiful blue ocean, this space is deep, vast and powerful when it comes to opportunities and profitable growth.
Comparing Red and Blue Ocean Strategy
Now that we have explained the Blue and Red Ocean Strategy meaning let us examine the two strategies. There are several aspects we should consider while making comparisons. They are as under:
1. The focus perspective
Red Ocean companies typically tend to focus on their current customers. They attempt to improve the customer experience and retain their existing customers who are already loyal to them. Blue Ocean companies, on the other hand, focus on increasing the size of the industry. They attempt to create a new niche and attract customers who have never made any purchases in that particular industry.
2. The competition perspective
With regards to Red Ocean companies, since the concept is already proven, other companies attempt to cash in on the proven concept and enter the field, creating new competition. As such, the competition already exists with other companies replicating the same tried-and-tested formulas. For the Blue Ocean companies, there is no competition since they are entering an uncontested market. If someone wins a customer in the new uncontested market, someone in the already existing red market may lose a customer. Thus, for one company to succeed, another has to lose. Players in the uncontested markets usually emerge as winners in the long run.
3. The relevance perspective
Companies following the Red Ocean Strategy already have to face a lot of competition since many companies offer the same things as they do. Thus, they need to beat the competition to remain relevant at all times. Conversely, Blue Ocean companies tend to make the competition irrelevant since there is no scope for duplicating an inexistent idea. This aspect gives an edge to innovative companies, often leading to them becoming commercially successful.
4. The demand perspective
Red Ocean companies tend to exploit the existing demand. They attempt to offer a better shopping experience to attract customers and encourage them to select their company over their competition. This is just as much space that red ocean companies can get. On the other hand, Blue Ocean companies attempt to create new demand and capture the market. They emphasise on creating high value to attract customers who had not previously considered entering the market.
Examples of red and blue ocean strategy companies
Red Ocean companies like Indigo and Spice Jet in India, Ryan Air in Europe and Southwest in the USA successfully penetrated in an already saturated ocean of short-haul airlines business. These are no-frills, low-cost airlines which have acquired customers but are always in direct competition with one another. Blue Ocean companies such as Ford Motor Co, Uber, Apple Inc. iTunes, and Cirque de Soleil have offered a completely new, innovative experience to customers. These companies created a new market that did not exist previously but were able to capture the collective customer imagination.
To run a business successfully, companies have to determine the strategy they intend to follow at the onset. While the Red Ocean Strategy can acquire customers, there is always competition, whereas blue ocean companies still have a competitive edge. To know more about Red and Blue Ocean Strategy visit the Angel Broking website