BTL 836- Blue Ocean and Red Ocean Strategy

 

The Banking Tutor’s Lessons

BTL 836                                                                   03-11-2025

Blue Ocean and  Red Ocean Strategy

 

The terms Blue ocean and red ocean are used to describe two powerful business strategy tools that can be used to succeed in a cut-throat business environment. The terms blue ocean and red ocean were coined by Chan Kim and Renée Mauborgne in 2005. The ocean analogy has been used to describe the market space with two broad categories:

Red Ocean represents the Existing Market Space characterized by ‘Bloody’ Competition.

Blue Ocean represents the Untapped Market Potential. 

Companies traditionally work in a red ocean environment, where businesses compete to grab a major share of the market.  The red ocean strategy aims to make your product survive in a market full of competitors. To beat the competition, companies try to differentiate their product from others. It could be through a unique product feature, a niche target audience, excellent customer service or competitive pricing. 

Conversely, in a blue ocean, the aim is not to beat competitors but to make them irrelevant. The strategy is to discover a new business where there’s little or no competition, no pricing pressure and a possibility of significant profits. 

Existing Market Vs. New Market Creation 

In the red ocean strategy, there’s no attempt to push beyond the visible boundaries of the marketplace. The blue ocean strategy searches for opportunities to create new markets where none exist. The large-sized common office copier soon became redundant. 

Beat Competition Vs. Make Competition Irrelevant 

The focus of red ocean strategy is on beating the competition with aggressive marketing, better pricing and outstanding user experience. The blue ocean strategy focuses on creating alternatives, be it products or customers. 

Capture Existing Demand Vs. Create New Demand 

The red ocean strategy tries to make the most of existing demand. A blue ocean strategy aims to create new demand. 

Make Value–Cost Trade-Off Vs. Break Value–Cost Trade-Off 

In a red ocean strategy, an organization has to choose between creating more value for customers and a lower price. In contrast, those who pursue a blue ocean strategy attempt to achieve both: differentiation and a low cost, opening up a new market space.   

Sekhar Pariti

+91 9440641014

(Repetition of BTL 499 dt. 27-12-2022)