Blue Ocean vs Red Ocean, Which is Strategic?

In the competitive business world, strategy is the key to survival and growth. Two approaches that are often discussed are the Blue Ocean and Red Ocean strategies.

The Blue vs Red Ocean analogy in business describes market and industry competition. Red Ocean or red color indicates fierce to 'bloody' competition for revenue, market share dominance, and success between companies.

Whereas a Blue Ocean indicates calmness and clarity, no contamination of business competition, and minimal market share so that growth opportunities can be explored.

Let's dissect the two to understand which one is more strategic in winning the market.

1. Blue Ocean Strategy: Creating Your Own Space

Definition of Blue Ocean Strategy

Blue Ocean Strategy carries the concept of creating a new market, where a company operates in a space that is untapped by competitors. It involves product innovation, differentiation, and a focus on unmet customer needs.

Advantages of Blue Ocean Strategy:

- Lack of direct competition

- Unlimited growth potential

- Opportunity to set higher prices

Examples of Success

Apple's launch of the iPhone

When Apple entered the smartphone market with the iPhone in 2007, it changed the way we interact with technology.

By incorporating innovative features such as multi-touch touchscreens and intuitive interfaces, Apple managed to create a new market where none existed before.

They not only gained significant market share but also paved the way for a new generation of technology products.

Uber transformed the transport industry.

2. Red Ocean Strategy: Surviving the Fierce Battle

Definition of Red Ocean Strategy

Red Ocean Strategy is a conventional approach where companies compete in an existing market. Fierce competition often results in a battle for a limited market share, with a focus on operational efficiency and cost reduction.

Advantages of the Red Ocean Strategy:

Measurable competition

Focus on operational efficiency

Increased cost advantage

Examples of Success:

Walmart emphasises low prices

As one of the largest retailers in the world, Walmart is known for its highly efficient Red Ocean Strategy approach. By focusing on cost reduction and operational efficiency, Walmart can offer competitive prices to its customers.

With great scalability and excellence in the supply chain, they ensure that competition in the market remains within their control.

Coca-Cola survives in the soft drink market.

3. Which one is Strategic?

Blue Ocean vs Red Ocean comparison:

Uniqueness

Blue Ocean: Emphasises innovation and product uniqueness.

Red Ocean: Focuses on efficiency and improving cost advantages.

Competitors

Blue Ocean: Minimal direct competition.

Red Ocean: Fierce competition with existing competitors.

Risks

Blue Ocean: High innovation risk.

Red Ocean: High risk of competition.

There is a risk that the efforts made will not result in creating a blue ocean. The success of this strategy depends on the organization's resources, talents, and position in the market.

Balancing the organization's two strategic imperatives (cost reduction and buyer value) can take time and effort.

Organizational hurdles, such as resource scarcity and lack of strategic alignment, can affect the outcome of a blue ocean strategy.

Businesses must attract enough customers to generate economies of scale and deter direct competition.

Blue ocean markets will eventually become red oceans when competitors emerge.

Choosing the Right Strategy

Choosing between Blue Ocean and Red Ocean Strategy is not always a black-and-white choice. Most companies find value in combining elements of both strategies. For example, while companies may seek new space in the market with innovation (Blue Ocean), they also need to maintain cost advantages and operational efficiency (Red Ocean).

Combining Both Strategies for Long-term Success

In a dynamic business era, the key to long-term success lies in a company's ability to adapt and innovate.

Blue Ocean Strategy offers opportunities to create new markets and change the rules of the game, while Red Ocean Strategy provides a solid foundation in fierce business battles.

By understanding the strengths and weaknesses of each strategy, companies can develop a holistic plan to achieve sustainable competitive advantage.