Blue Ocean and Red Ocean Strategy- Make Use of the Right Business Strategy for Success

Blue ocean strategy is different from red ocean strategy, as it focuses on creating new boundaries for any business. Red oceans symbolize the existing marketplace where the competition is intense and stiff. This sets a trap for the companies who work hard to beat that competition by creating and implementing aggressive and highly- competitive strategies. If an organization wants to sail through the clear blue waters, then it has to make use of the untapped market potential which involves the task of creating an innovative blue ocean strategy for success.

Blue Ocean and Red Ocean   

Courtesy – TurningPoint Boston

How does a Blue Ocean Strategy Differ from a Red Ocean Strategy?

1. Blue Ocean Strategy does not Focus on the Competition

A blue ocean strategy focuses on the customer and not the competition. Red ocean strategy is a trap that keeps the companies anchored to their focus on beating the competition with various competitive strategies. Red ocean strategies revolve around making strategies that include benchmarking their rivals or entering an already competitive market with new products that serve the same old purpose. On the other hand, a blue ocean strategy focuses on ‘what a customer wants’ and this leads to the birth of innovative products and services in a new market space that is full of opportunities. The most appealing part about a blue ocean is that it not only works on making the existing customers happy, but also on converting the non- customers into a company’s customers.

Yellow Tail Wines- Blue Ocean Strategy

Yellow Tail Wines by the company Casella Wines is a perfect example in this case. For years, the competitive wine industry in the U.S. focused on factors like Price per bottle of Wine, Aging Quality of Wine, The Prestige of a Wine’s Vineyard, the complexity and sophistication of taste, and on providing a diverse range of wines to the existing customers. Casella Wines looked beyond these set industry parameters and worked on creating a blue ocean which helped it in converting non-customers to customers for Casella Wines. The company introduced Yellow Tail Wine in the market which as a wine product focused on providing a fun and nontraditional wine that was an easy to drink wine for every consumer. They eliminated and even reduced some of the factors that were not important and focused on factors like easy drinking, ease of selection, and fun and adventure while launching their new product in the market. The results were amazing, as the blue ocean strategy helped in converting non-wine drinkers to wine drinkers, which eventually expanded the customer base of the company.

2. Blue Ocean Strategy does not Work on the Assumption that ‘Industry Structure is Fixed and Cannot be Altered in Any Way’

Red ocean strategies work on the assumption that industry structure is fixed and cannot be altered. On the other hand, blue ocean strategies work on the thought that industry structure is not given, and it can be shaped. Cirque De Soleil, a Canada based company made a revolution in the Circus Industry by breaking across the boundaries of fixed industry structure.

Cirque de Soleil- Blue Ocean Strategy

The most remarkable part about the success of Cirque de Soleil is the fact that it made such a big success journey in a declining industry, where entertainment had taken new shape in the form of video games for children. The company provided high-value and differentiation at the same time, by taking a dive into the blue ocean of opportunities. Cirque de Soleil used a strategy that helped it in converting the non-customers to customers for the company. The company broke the boundary between market and circus and created a strategy that focused on providing the thrill of a circus and the sophistication of a theatre at the same time. So, by adding intellectual wonder to the acts of their performers the company created a new blue ocean for itself in the market.

3. Blue Ocean Strategy is about Breaking the Value- Cost Trade- off

Blue Ocean Strategy focuses on the concept of Value innovation, which looks at breaking the rule of value- cost trade- off. Red ocean strategy revolves around the rule that the companies have a choice of either providing the customers with greater value at high- cost or lower value at low- cost. Blue ocean strategy breaks this rule by helping the companies to pursue a strategy that brings low cost and differentiation simultaneously. Cirque de Soleil made a move in this direction by ‘trying not to secure famous clowns and animal tamers. This reduced the costs and expenditures of the company and combined with a unique experience of both theatre and circus under one roof, the company achieved the goal of value innovation with its blue ocean strategy. So, a blue ocean strategy does not limit the potential of a company to the rule of ‘value-cost trade-off.

4. Blue Oceans Look at Creating and Capturing New Demand

The overall problem of a red ocean strategy is that it revolves around making new space in the old competitive market. Blue ocean on the other hand works around creating and capturing a whole new market. A blue ocean strategy does not work on competing in the existing market, instead it looks at making the competition irrelevant by creating new boundaries.

Canon- Blue Ocean Strategy (Changing the Old Strategy)

Canon is a perfect example in this context, as it used a blue ocean strategic move to create and capture a whole new market for its personal desktop copier business. Traditionally the personal desktop copier businesses targeted office purchase managers for selling their machines in the market. Canon, a Japanese company created a blue ocean for itself by shifting its customer base from office purchase managers to users. Purchase managers always insisted on purchasing machines that were heavy, fast, and required very low maintenance. Canon understood the dilemma of the end user who handled the heavy machines and created a blue ocean strategy that targeted the end user for their product. They understood that eventually the secretaries used these machines, and this motivated them to create easy to handle, small and compact Canon desktop printers. This strategic move created a new wave in the industry and Canon became a market leader in the newly created market with its strategically crafted Value Innovation move.

So, red oceans and blue oceans are far apart from each other, as they tend to deliver different results with the help of different set of rules that they tend to follow. A company should definitely look at sailing in the clear blue ocean waters with the help of a strategy that allows it to create a niche for itself in the new innovative market.