They can be reconstructed by industry players. A blue ocean strategy adopts the belief that markets and industries are not structured to beget competition. Gaining advantage in a red ocean is a supply-side focus where cost and differentiation strategies are trade-offs. This is also known as environmental determinism.
In a red ocean strategy, a structuralist view is that a competitive market is structured by conditions that force firms to compete. Competitive strategies are necessary, but they are not adequate to grow a market position. Thus, the red ocean generally offers less opportunity for growth.Ī blue ocean strategy seeks to avoid competition completely thus, competitive strategies are less important. The result of the competition is destruction, which draws the analogy of red blood in the ocean water. These competitors may possess a competitive advantage driven by cost, differentiation, or niche market strategies. A red ocean is a saturated market with industry competitors. The counter to the blue ocean is the red ocean. Back to: STRATEGY & PLANNING Blue Ocean vs Red Ocean Strategy The result is the development of a market that is devoid of competition and allows for extensive growth or growth potential without the need for competitive differentiation or cost advantage. This innovation may take place at any or all stages of the value chain. Value innovation involves the pursuit of both differentiation and low-cost strategies to open up new and non-competitive markets. These new markets are blue oceans.Ĭreating a blue ocean is difficult and generally requires the company to innovate (a concept coined as value innovation) in a way that creates a previously non-existent or unrealized demand.
It posits that creating a new market can be more beneficial than competing in an existing market with established competitors. Kim and Mauborgne of INSEAD Business School. The blue ocean strategic concept was developed by Profs.
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