Hamza Amin MSBA 018

WHAT IS BLUE OCEAN STRATEGY?
Blue ocean strategy is the simultaneous pursuit of differentiation and low cost to open up a new
market space and create new demand. It is about creating and capturing uncontested market
space, thereby making the competition irrelevant. It is based on the view that market boundaries
and industry structure are not a given and can be reconstructed by the actions and beliefs of
industry players.
Blue oceans, in contrast, denote all the industries not in existence today – the unknown market
space, untainted by competition. In blue oceans, demand is created rather than fought over. There
is ample opportunity for growth that is both profitable and rapid.
A blue ocean strategy is based on creating demand that is not currently in existence, rather than
fighting over it with other companies. You must keep in mind that there is a deeper potential of
the marketplace that hasn’t been explored yet. Most blue oceans are created from within red
oceans by expanding existing industry boundaries. The key to a successful blue ocean strategy is
finding the right market opportunity and making the competition irrelevant.
“The key goals of the blue ocean strategy are finding the right marketing opportunity and making
the competition irrelevant.”
In blue oceans, competition is irrelevant because the rules of the game are waiting to be set. A
blue ocean is an analogy to describe the wider, deeper potential to be found in unexplored market
space. A blue ocean is vast, deep, and powerful in terms of profitable growth.
WHAT IS RED OCEAN STRATEGY?
A red ocean strategy involves competing in industries that are currently in existence. This often
requires overcoming an intense level of competition and can often involve the commoditization
of the industry where companies are competing mainly on price. For this strategy, the key goals
are to beat the competition and exploit existing demand.
“The key goals of the red ocean strategy are to beat the competition and exploit existing
demand.”
One industry in which a red ocean strategy would be necessary is the soft drink industry. This
industry has been in existence for a long time, and there are many barriers to entry. There are
industry leaders in place such as Coke and Pepsi, and there are also many smaller companies also
in competition for market share. There’s also limited shelf space and vending spots, well-
established brand recognition of popular, current brands, and many other factors that affect new
competition. This causes the soft drink industry to be very competitive to enter and succeed in.
Difference between Blue and Red ocean strategies?
1. Blue Ocean Strategy 2. Red Ocean Strategy

Create new markets. Compete in existing markets.
Beat competitors. Make competitors absolute.
Create and capture new demand. Exploit existing demands.
Breaks cost value trade-offs. Make cost value trade-offs.
Pursues both differentiation and cost. Chooses between differentiation and cost.
.
Which ocean are you in?
If you are professionally a corporate person and have still not heard about the Blue Ocean
Strategy, then you are seriously missing out! Google it, Wikipedia it, read up thoroughly. For
this could really be life-changing, especially if you are involved in planning, strategizing and
policy making. If building a competitive advantage is your responsibility, then devouring the
Blue Ocean theory and pondering how you can apply it to your task is really a must.
Developed by 2 professors at INSEAD back in 2005, the Blue Ocean strategy is based on a
comprehensive study of 150 strategic moves spanning more than 100 years and 30 industries. It
provides a systematic approach to making the competition irrelevant and creating uncontested
market space. The basic premise of Blue Ocean thinking is simple. Most companies, irrespective
of the sector they belong to, are constantly in an intense rivalry with their competitors, in order to
try and build an edge over others, or in other words, try and achieve a competitive advantage.
Generally speaking, this head-on competition cuts into profits and at best gives only temporary
advantage in most cases, with the gains also being incremental only, before the competitors fight
back and develop their own temporary, incremental advantage. And so the battle continues,
blood flows and the ocean (sector) the companies are in, turns red. Examples of Red Oceans
abound. Consider the cellular industry in Pakistan for example. Constant price wars and
countless ‘packages’ personify how the cellular companies are strategizing their marketing. The
results? Shrinking margins, distributed loyalty (an estimated 20% users own multiple SIMs) and
amongst the lowest ARPU (Average Revenue Per User) figures in the world.
Even if competitors in a Red Ocean are still chalking up some profits, it is clear to many that
sustainable profits in the long-run are by no means guaranteed, and the more astute are seriously
concerned about their very survival in the future. These are the very issues that the Blue Ocean
Strategy (BOS) addresses.The cornerstone so to speak, of the Blue Ocean Strategy is the concept
of Value-Innovation, which stipulates that:
Instead of focusing on beating the competition, focus on making the competition irrelevant, by
creating a leap in value for your clients and your company, thereby opening up new, uncontested
market space.
Value innovation places equal emphasis on VALUE and on INNOVATION.
Value without innovation is value creation – incremental benefits.
Innovation without value (usually technology driven) is little more than a gimmick.
So Value Innovation is breaking new space and offering clear benefits.
The Blue Ocean Strategy provides an analytical framework and the tools for successfully
creating and capturing blue oceans. For marketers in particular and strategists in general, both at
the brand and overall company level, an in-depth study and understanding of the BOS can be
really insightful. Of course each company and each brand needs to adapt the Strategy to its own
particular circumstances, within the broad parameters and guidelines of the Strategy.
The strategy aims to capture new demand, and to make competition irrelevant by introducing a

product with superior features. It helps the company in make huge profits as the product can be
priced a little steep because of its unique features
Looking ahead, the choice then is to continue thrashing around wildly in the Red Ocean and risk
drowning, or change over to the clear waters of the Blue Ocean and swim with powerful strokes
to sustainable profitability.
Red oceans represent all the industries in existence today – the known market space.
In red oceans, industry boundaries are defined and accepted, and the competitive rules of the
game are well understood.
Here, companies try to outperform their rivals in order to grab a greater share of existing
demand.
As the space gets more and more crowded, prospects for profits and growth are reduced.
Products turn into commodities, and increasing competition turns the water bloody.
Blue oceans denote all the industries not in existence today—the unknown market space,
untainted by competition.
In blue oceans, demand is created rather than fought over. There is ample opportunity for growth
that is both profitable and rapid.
There are two ways to create blue oceans. In a few cases, companies can give rise to completely
new industries, as eBay did with the online auction industry.
But in most cases, a blue ocean is created from within a red ocean when a company alters the
boundaries of an existing industry.

Hamza Amin MSBA 018

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WHAT IS BLUE OCEAN STRATEGY?

Difference between Blue and Red ocean strategies?

1. Blue Ocean Strategy 2. Red Ocean Strategy

Which ocean are you in?

The strategy aims to capture new demand, and to make competition irrelevant by introducing a

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