Value Innovation Associates

What is Blue Ocean Strategy?

Red oceans represent all the industries in existence today. In the red ocean, companies try to outperform their rivals to capture a greater share of existing demand. As companies compete head-on, the red ocean often turns bloody and prospects for profits and growth are reduced. The main strategic thrust is endless benchmarking of competitors and trying to outdo them. In the end, the competition sets the strategic agenda.

Blue oceans, by contrast, are defined by untapped markets and the opportunity for highly profitable growth. They are vast, deep, and untouched. Here, demand is created rather than fought over. Companies that create blue oceans strive to make the competition irrelevant by providing a leap in value for customers and the company.

Summary of Red Ocean Strategy vs. Blue Ocean Strategy

Red Ocean Strategy Blue Ocean Strategy
Compete in existing market space Create uncontested market space
Beat the competition Make the competition irrelevant
Exploit existing demand Create and capture new demand
Make the value/cost trade-off Break the value/cost trade-off
Align the whole system of a company's activities with its strategic choice of differentiation or low cost Align the whole system of a company's activities in pursuit of differentiation and low cost

Source: Kim and Mauborgne

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