In today’s environment, most businesses compete hard for market share and will do anything to get it. The competition is usually so intense that some businesses cannot survive.
Blue ocean strategy is a strategy that encourages enterprises to think beyond the competition by developing new uncontested market space that makes the existing competition irrelevant.
Blue Ocean is about growing demand and breaking away from the competition.W. Chan Kim
The terms Red Ocean and Blue Oceans were invented by Chan Kim and Renée Mauborgne to describe the market universe in their book Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant (2005).
What Is Blue Ocean?
Blue oceans represent all of the industries that do not exist today. the untapped market area that is free of competition. Demand is created rather than fought for in blue oceans. There is plenty of room for both profitable and quick growth.
The creation of blue oceans, in other words, is a product of strategy and as such is very much a product of managerial action.W. Chan Kim
What Is Red Ocean?
Red oceans represent all of the industries that exist today. the recognized market space.
According to W. Chan Kim, in red oceans, industry boundaries are specified and accepted, and the competitive rules of the game are well understood. Companies compete to outperform their competitors in order to capture a larger share of the current demand. Profitability and growth opportunities are decreasing as the market becomes increasingly saturated. Products become commodities, and increased rivalry turns the water bloody.
Red Ocean vs Blue Ocean Strategy
The Defining Characteristics
Chan Kim & Renée’s research shows several common characteristics across strategic moves that create blue oceans.
They found that, in contrast to traditional business, blue ocean creators never consider the competition as a benchmark. Instead, they make it irrelevant by producing a value increase for both buyers.
The authors argue that the most important feature of blue ocean strategy is that it rejects the fundamental tenet of conventional strategy: that a trade-off exists between value and cost. when it comes to creating blue oceans, the evidence shows that successful companies pursue differentiation and low cost simultaneously.
It is important to remember that creating value and innovating are important success factors. Understand the industry in which you compete, as well as new market entries that may threaten your market share.
ABOUT THE AUTHORS
W. Chan Kim and Renée Mauborgne (@blueoceanstrtgy) are professors of strategy at INSEAD and codirectors of the INSEAD Blue Ocean Strategy Institute. They are the authors of The New York Times and Wall Street Journal best-seller Blue Ocean Shift: Beyond Competing (Hachette Books, 2017) and the global best-seller Blue Ocean Strategy (Harvard Business Review Press, 2005; expanded edition, 2015).
Learn more about red and blue ocean strategies from the authors of the book on their website.
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