This article explores red ocean strategies – competing in an existing market – and the limitations of red oceans relative to blue ocean strategies.
Red oceans: Competing in an existing market
In the blue ocean framework, red oceans are existing markets, where the rules of the game are known. This includes industries that have been around for decades, where the attributes that each of the firms competes on are relatively similar.
Fighting over the same customers
Red oceans involve competing over the same customers – the market is defined, and so the only way to grow is to steal customers from other firms. This can result in intense competition – firms cutting pricing as a way to try and convince customers to choose their product over other similar offerings.
The red ocean analogy: Blood bath
The red ocean analogy is that there is a blood bath of competition. The competition is fierce, with firms attacking one another – by one-upping features, or reducing prices – as a way of capturing customers. It is a win-loose mentality, you take market share at the expense of your competitors.
Disadvantages of competing in a red ocean
The key disadvantage of competing in a red ocean is:
- Limited growth opportunities
- Firms fighting intensely with one another
- All firms look similar – with limited reasons for a customer to choose one firm over the other (i.e., purchasing on the basis of price).
Final thoughts: Stepping away from red oceans with a blue ocean strategy
The blue ocean framework looks to step away from red oceans by identifying a new market – with different product attributes. The idea is that rather than competing with other firms in the blood bath, you create your own market – a blue ocean where there are no firms to compete.