Blue Ocean Strategy vs Red Ocean Strategy

Understanding the differences in both concepts…

The analogy of red and blue oceans describes the market universe. Red oceans are all the industries in existence today or the known market space. In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known. Here companies try to outperform each other to achieve a greater share of product or service demand in a world where growth is increasingly limited. As the 'ocean' gets crowded, prospects for profits and growth are reduced. Products become commodities and cut-throat competition turns the red ocean bloody. Hence, the term red oceans.

Blue oceans, on the other hand, denote all the industries not in existence today or what we called the unknown market space, untainted by competition. In blue oceans, demand is expanded or created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. Here, in blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to describe the wider, deeper potential of market space that is not yet explored.

Blue Ocean Strategy is a business strategy book that promotes a systematic approach "for making the competition irrelevant." The authors, W.Chan Kim and Renée Mauborgne, are professors of Strategy and Management at INSEAD. A core idea is to create a leap in value for both the company and its buyers by breaking the differentiation/low cost trade-off and to align product value and profit propositions.