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Red Ocean and blue oceans are words that Chan Kim and Renée Mauborgne created to describe the market environment.
The known market area, where industry borders are established and businesses compete to gain a larger portion of the market, is described as a “red ocean” and encompasses all the current industries. The ocean becomes scarlet red due to fierce rivalry. therefore, the designation “red” oceans.
The term “blue oceans” refers to all the sectors that do not yet exist, or the untapped, uncontaminated market space. It is broad, deep, and strong—in terms of opportunity and profitable growth—just like the “blue” ocean.
Red Ocean Vs Blue Ocean
By developing new sectors, the blue ocean strategy seeks to render the competition obsolete by reorienting strategic imperatives away from outperforming rivals in existing markets. Companies might employ this tactic if there is currently more supply than demand in their present market or if turnover has increased and profit margins are narrowing.
Blue ocean enterprises simultaneously pursue the following goals in order to create uncontested market space with fresh demand for goods or services that don’t yet exist:
Contrary to the blue ocean strategy, red ocean strategies are used. They discuss business tactics that companies employ to expand and prosper in well-established marketplaces.
Red oceans are teeming with companies vying for the same clients. In red oceans, maintaining expansion becomes more challenging as earnings decline.
Enterprises are forced to decide between cost leadership and distinctiveness in red ocean marketplaces. Utilising demand and outperforming rivals simultaneously is necessary for success in red ocean markets. Greater size and resources are required for red ocean markets to effectively compete.
Red Ocean Strategy Vs Blue Ocean Strategy
Red ocean strategists concentrate on creating advantages over the competition in order to survive in the market. Typically, they do this by analysing what their rivals do and trying to improve upon it. In this case, gaining a larger portion of a limited market is viewed as a zero-sum game in which one company gains at the expense of another. In the increasingly constrained crimson ocean, they concentrate on dividing it apart. By categorising industries into desirable and unattractive ones, businesses can determine whether or not to enter each one.
Blue ocean strategists do not let existing market structures constrain their thinking since they understand that market limits only exist in managers’ minds. They believe that there is untapped additional demand out there. The main issue is how to produce it. In turn, this calls for a change in focus from supply to demand, from a focus on competing to one on developing novel value to spark new demand. This is accomplished by pursuing distinction and low cost at the same time.
There is hardly ever an attractive or unattractive industry per se under the blue ocean strategy because the level of industry attractiveness can be changed by enterprises’ diligent efforts. By eliminating the value-cost trade-off, market structure and game rules are both altered. The old game’s competition is consequently irrelevant. New wealth is produced through increasing the economy’s demand side. Therefore, using such a method enables businesses to play a non-zero-sum game with huge payout potential.