Red ocean strategy is to compete in the existing market space, is in the price or in the promotion of price competition, they are fighting for efficiency, but increased cost of goods sold or reduced profits. The blue ocean strategy is to create uncontested market space, beyond the scope of competitive thinking, to create new market demand, to create new market space, through value innovation to obtain new space.

Blue Ocean Strategy argues that focusing on red oceans is tantamount to accepting the limiting factor of the business war, which is to win on limited land, but denying the possibility of creating new markets in the business world. Using Blue Ocean Strategy, the vision will move beyond competitors to buyer needs, crossing existing competitive boundaries, sifting and reordering buyer value elements in different markets, and shifting from positioning choices under a given structure to changing the market structure itself.

The concepts of "Red Ocean Strategy" and "Blue Ocean Strategy" were first introduced by Prof. W. Qian-King and Prof. Renée Mauborgne of INSEAD in their book "Blue Ocean Strategy".

Expanded Information

I. Red Ocean Strategy I. Competition I. Adaptation

In a red ocean, the industrial boundaries are clear and certain, and the rules of competition are known. Enterprises in the red sea try to outperform their competitors in order to capture a larger market share under the known demand. Competition is therefore a constant theme of red ocean strategy. A typical way for a company to increase its market share is to try to maintain and expand its existing customer base. This, in turn, usually triggers further segmentation of customer preferences in order to offer tailored products. Improving your resilience by tracking changes in customer needs can be called "on-demand".

Michael Porter's book Competitive Strategy, published in 1980, suggests that in order to achieve a sustainable competitive advantage, firms must choose one of three strategies: low-cost, differentiation and concentration. The three strategies are internally consistent, i.e., they require firms to either control costs to a lower degree than their competitors;

or to provide products or services that are different from those of their competitors, or to specialize in a particular market segment or product category. He also proposed the Five Forces of Industrial Competition model to analyze the competitive environment of the industry, pointing out that there are five basic forces of industrial competition, and the status of these five forces and their combined intensity determines the degree of competition in the industry;

it also determines the ultimate profitability of the industry, i.e., the attractiveness of the industry. The five basic forces are: competition from rivals in the industry, bargaining power of suppliers, bargaining power of buyers, threat of potential entrants, and threat of substitute products. This model is also known as industry attractiveness model.

II. Blue Ocean Strategy - Value Innovation - Demand Creation

Blue Ocean implies uncultivated market space, demand creation and opportunities for high profit growth. In blue ocean, competition does not exist because the rules of the game have not been established. Value innovation is the foundation of blue ocean strategy, which seeks to make a leap in value for both customers and companies, thus opening up a new, non-competitive market space.

Blue ocean strategists believe that the boundaries of a market do not exist, so their way of thinking is not constrained by the structure of the existing market. They believe that there must be untapped demand in the market, the question is how to find it. Therefore, the focus should be shifted from supply to demand, and from competition to the creation of value through the discovery of new demand.

Competition-oriented strategic thinking makes companies in red oceans first categorize industries as attractive and unattractive, and then decide whether to enter the industry. In the view of the blue ocean explorers, the market is not attractive and unattractive, because these can be changed through the enterprise's own efforts and reengineering;

The structure of the market can be changed, and the rules of the market game can also be changed. Competition in the original rules of gaming can become irrelevant, and markets can be expanded and created by stimulating demand, and through strategies of value innovation. Value can be gained through innovation, not through competition.

Baidu Encyclopedia-Blue Ocean Strategy

Baidu Encyclopedia-Red Ocean Strategy