Marketing Strategies

Strategies at glimpse
At first guess, the terminologies “blue ocean” and “red ocean” give the impression to have
something to do with maritime life, geography or even related to biology. But in fact, they were
nominations introduced to bring some clearness to the types of market spaces, especially during
a new product or service launch.
This notion of the blue and red ocean was primary hosted by Renée Mauborgne and Chan Kim in
the early 2000s when they published a book under the name of “Blue Ocean Strategy”. The
writers tackled in their publication the basic and fundamental issues such as conducting market
analysis, facing competition and even creating demand.

The annotation of blue ocean and red ocean are actually a representation to the two types of
market areas. The resemblance with, and the comparison to the natural milieu determines the
characteristics of opposing market surroundings. The blue ocean is the term designation for a
newly encountered or newly established business, whereas the red ocean nomination signposts
an already existing industry.

Lot of companies nowadays rely on the red ocean strategy when entering a market since that they
find it challenging to invent and come up with new thinking. In their perspective, everything that
could have been thought up is already there. In terms of danger, risks and threats awaits any
company in a water full of blood resulting from fighting over the same market, the same demand
and the same sales. However, coming with the new innovative ideas, new market shares and
creating new demand is also a huge responsibility.

Blue Ocean Vs Red Ocean

The key idea coined in the terms of blue ocean and red ocean strategies is the color indications.
The blue color refers to the tranquility and peacefulness. Moreover, it also represents deepness,
steadiness, and even intelligence. In such a market milieu, companies yearn for creating demand
in a new market location rather than to competing for the same market one. On the other hand,
red color is affiliated with strong devastating emotions, such as bloodiness and hatred. Such an
industry is best tagged by a tough competitiveness and tension. In such a market environment,
the companies try to overtake their contenders through more destructive advertising, price wars,
and other maneuvers.
1. From a market space perspective:
The blue ocean strategy/method creates a new market by offering a wholly new and
unique project. By having the chance of being an innovator, you can found all the rules
for this market by yourself and make it operate for your own benefit. Nevertheless, as a
 pioneer, you must take into consideration the customer behavior, pricing models, and
other meaningful things.
The red ocean methodology applies to an already existing market space. It has already its
rules established, designs, and major determinants.

2. From a competition perspective:

Competition is one of the utmost significant features of any market. Companies shape
various kind of their strategies, expand their analysis or even adjust the price of their
products and services depending on their competitors. They benefit from their strengths
and take advantage of their opponents’ weaknesses.
On this level, the red ocean technique implies that the market space is over flooded with
endless number of products. Those products vary between high-quality products and low
quality products that fail to meet up with the end users’ expectations. Nonetheless, the
selection is already considered vast and the red color indicates bloody and strict
competition tied with anxious conditions preventing growth and discouraging
development.
However, if a blue ocean strategy is being adopted than the situation is reasonably
contradictory. New projects (products or services) are being presented and a newly
advanced market space is being established. Accordingly, no competitors exist, at the
beginning at least. This is why the newly innovative introducer can adjust the strategies
and pricing freely, and do not have to take into consideration any rules (existing ones),
because he is the first one to set all the market regulations. The blue ocean market space
is an open ocean and is similar to an empty page. Even though companies adopting blue
ocean strategy have to be cautious on all levels when coming up with new products,
fortunately, since they are alone in the market it is considered easy to fix the errors and
start all over again.
The red ocean strategy beats the competition while the blue ocean strategy makes the
competition irrelevant.

3. From a demand perspective:

Once the company’s product is in the red ocean, then it is exploiting an already existing
demand. This strategy lean towards being safer as companies can benefit by looking at
the companies that have prospered and companies that have failed and acquire from their
experience.
If a company’s project is being firstly introduced in the blue ocean kind of marketplace,
this implies that it is building its demand from scratch. Such a thing entails a risk and
uncertainty given the fact that no predictions or foreseeing can be made about whether
the end user will like the product or ignore it.
Red ocean strategy adopter exploit existing demand while blue ocean strategy adopter
creates and captures new demand.
Examples of products using Red and Blue Ocean Strategy
Automotive/Airline Industries – Red Ocean Strategy:

A great illustration to a red ocean market is the automotive and airline industries. Businesses in
these marketplaces use same techniques like publicity and pricing approaches to increase their
market share. However, with a market full of entrants, the fight to gain higher share value is even
harder. This means industries spend more budgets on customer services, advertising, marketing,
or cut prices to attract more customers. Such steps decrease profit and intensify competition,
resulting in lower chances for growth. The opposition is so harsh that it is referred to as cutthroat
competition. The red ocean gets its name from the idea of oceans being red with blood from
cutthroat competition. (Delta Vs. British Airways).
ITunes – Blue Ocean Strategy:

An example that illustrates a blue ocean strategy is ITunes. It was the original invention of its
kind in the market. It was creating a demand itself as no one could give assurance if consumers
will pay for such a service if they can download music for free. Consequently, iTunes created
new features such as playing audiobooks and connecting to special devices for listening to music
such as the iPod devices. The product keeps changing itself to adapt to the new demands of the
customers.

Strategies relation with Porter’s five forces

A strong relation exists between Porter’s five forces and market oceans strategy.

Porter’s five forces model is an analysis that uses five different forces to define how intense is
the competition is in a market and its profitability level. The forces in this tool varies from one
strategy to the other but also play a major role in the identification of the market space. The five
identified forces are:

1. Threat of entry: this force defines how easy or how hard it is to penetrate in a particular
industry. If an industry is profitable and there are low boundaries to enter, competition
will intensify (Red Ocean Strategy). On this level, more companies will compete for the
same market shares and therefore profit will decrease. If an industry is the first of its
kind, it will automatically lead the market, generate its own demand and create high
barriers to enter the market to deter new entrants (Blue Ocean strategy).
2. Bargaining power of suppliers: a stronger bargaining power allows suppliers to sell
higher priced or low quality products. When there are few suppliers but many buyers, this
will strengthen the suppliers’ bargaining power.
3. Bargaining power of buyers: buyers tend to demand lower prices or higher quality
products if they have a strong bargaining power. Buyers’ bargaining power increases
when only few buyers exist.
 4. Threats of substitutes: this power threatens more when consumers can easily find
substitute products. Unlike in a blue ocean market space where few substitutes and
companies exist, a red ocean market space contains more entrants (which means more
substitutes products) competing to attract and force buyers to change from a product to
another substitute one.
5. Industry Rivalry: this force is the key indicator on the level of competition existing in an
industry. In a red ocean competitive environment, organizations have to aggressively
compete to gain higher market share resulting in low profits. Contrary, a blue ocean space
denotes all the inexistent businesses yet, the unknown market space, unexplored and
untainted by competition.

In a Nutshell
Usually companies compete with one another to gain shares in crowded markets (red ocean
strategy) but a different approach came to light, the blue ocean strategy, which avoids competing
and instead looks to create demand in untapped markets.

Both red and blue ocean approaches have their advantages and consequences. To know which
market space will be the most rewarding for any project is to recognize the needs of the
customers.

In case the company sees that regardless of the large competition can still offer a valuable and
useful solution, it can enter the red ocean bravely and learn from its rivals.

If the company is assured that its newly innovated product will hit the industry and make a
massive demand, it should dive deep into the vast blue ocean.