Rethinking Strategy: Red Ocean Vs Blue Ocean Business

The way to succeed in business is to have a plan of action, called a business strategy. A strategy helps you build a vision and defines the direction that the company should take. Simply put, a business strategy is a set of clear plans, goals and actions that indicate a business' course of action to succeed in a market or industry.

Among the popular strategies entrepreneurs take up are red ocean and blue ocean strategies. These strategies affect a business' profitability and growth.

Red ocean vs. blue ocean

The terms red ocean and blue ocean refer to two types of market spaces. The terms are made out of natural environmental analogies to show the two market environments' differences. In this context, red symbolizes passion, tension and intense competition, while blue symbolizes stability, depth and intelligence.

The red ocean business environment is the current business setup. Businesses have defined markets, market shares, competitors and they use value addition strategies to differentiate themselves in the market. All the industries that exist today are red oceans. The survival strategy of businesses is to outperform the rivals for a more significant share of the available market. The aggressive competition between companies turns the business ocean bloody red.

The blue ocean business setup is the exact opposite of the red ocean. It is the future of businesses, and it refers to the unexplored, unknown and currently inexistent market space. Blue ocean is a new way of thinking, and it requires businesses to create their individual market spaces instead of competing with others in a limited space. The blue ocean setup offers businesses unexplored depth and vastness, capable of driving the businesses to indefinite profitability and growth.

Firms do not need competitive strategies in the blue ocean setup, unlike the red ocean. For example, they do not have to unduly offer their products at the lowest cost to catch the consumers' attention. Instead, blue ocean businesses creatively work to bring down their production costs, resulting in low prices and a higher profit margin. In this way, the businesses establish a demand rather than fighting over the current market with other businesses. The goal is to make market rivalry irrelevant and instead promote organizational growth.

The reasons businesses need a change in strategy

It is time for businesses to shift from the red ocean to the blue ocean business strategy. The red ocean setup is not the best environment for businesses under the new market conditions. Supply is surpassing demand in both the local and international markets. There are now more producers of goods and services because technology has eased industrial productivity. Companies are also now able to diversify their production, which increases the availability of products and services.

In this setup, a business is always at risk of being upended by its rival. The fear of going out of business causes entrepreneurs to turn to strategies that could ultimately harm their customers or themselves. For these reasons, businesses should consider shifting their setups from the red ocean to the blue ocean.

The benefits to expect after shifting strategy

A blue ocean business strategy is non-zero-sum, meaning the sum of the winnings and losses of the players in the market is not zero. It allows for a win-win game where every player can win. In contrast, the red oceans business is a zero-sum game because it divides the wealth available to industry among the rival companies. With many players and high competition, the companies' growth and profit prospects decline. So, with the blue ocean, entrepreneurs increase their chances of succeeding and thriving in their industries.

Final thoughts

Today's global market trends have made the market fiercer. These developments make it practical for companies to shift their business strategy from red to blue.

It would seem entirely illusory to suggest a business can develop a unique business setup that is completely different from what society is used to. But, with some creativity and a change of approach, entrepreneurs can find new solutions to the problems that plague them. You never know what could be hiding in the depth of a deep blue unstirred ocean.