What is meant by a red ocean Mcq?

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Red Ocean Strategies
Blue Ocean Strategies
The Winning Strategic Approach

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It can be difficult to succeed with the cutthroat competition in the business environment today. Luckily, there are many strategies you can use in order to gain an edge on your competition. Two of these are red ocean and blue ocean strategies, which were introduced by W. Chan Kim and Renée Mauborgne in 2005.

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Red Ocean Strategies

A red ocean strategy involves competing in industries that are currently in existence. This often requires overcoming an intense level of competition and can often involve the commoditization of the industry where companies are competing mainly on price. For this strategy, the key goals are to beat the competition and exploit existing demand.

“The key goals of the red ocean strategy are to beat the competition and exploit existing demand.”

One industry in which a red ocean strategy would be necessary is the soft drink industry. This industry has been in existence for a long time, and there are many barriers to entry. There are industry leaders in place such as Coke and Pepsi, and there are also many smaller companies also in competition for market share. There’s also limited shelf space and vending spots, well-established brand recognition of popular, current brands, and many other factors that affect new competition. This causes the soft drink industry to be very competitive to enter and succeed in.

Blue Ocean Strategies

A blue ocean strategy is based on creating demand that is not currently in existence, rather than fighting over it with other companies. You must keep in mind that there is a deeper potential of the marketplace that hasn’t been explored yet. Most blue oceans are created from within red oceans by expanding existing industry boundaries. The key to a successful blue ocean strategy is finding the right market opportunity and making the competition irrelevant.

“The key goals of the blue ocean strategy are finding the right marketing opportunity and making the competition irrelevant.”

An example of a successful execution of a blue ocean strategy is the iPod. When the iPod was introduced in 2001, Steve Jobs said that “with [the] iPod, Apple has invented a whole new category of digital music player that lets you put your entire music collection in your pocket and listen to it wherever you go.” Apple looked beyond what was in the market at that time and introduced a product that created a new industry in and of itself. Apple looked beyond what customers were asking for and created a successful product.

The Winning Strategic Approach

While the authors of Blue Ocean Strategy suggest using the latter approach, no matter which you select, there are a few things to keep in mind. First of all, it is important to remember that value creation and innovation are critical success factors. Also, remain aware of the industry that you are competing against as well as new introductions to the market that may disrupt any market share that you have attained.

Learn more about red and blue ocean strategies from the authors of the book on their website.

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Chan Kim & Renée Mauborgne coined the terms red and blue oceans to denote the market universe. Red oceans are all the industries in existence today – the known market space, where industry boundaries are defined and companies try to outperform their rivals to grab a greater share of the existing market. Cutthroat competition turns the ocean bloody red. Hence, the term ‘red’ oceans.

Blue oceans denote all the industries not in existence today – the unknown market space, unexplored and untainted by competition. Like the ‘blue’ ocean, it is vast, deep and powerful –in terms of opportunity and profitable growth.

The chart below summarizes the distinct characteristics of competing in red oceans (Red Ocean Strategy) versus creating a blue ocean (Blue Ocean Strategy).

Compete in existing market space

Make the value-cost trade-off

Align the whole system of a firm's activities with its strategic choice of differentiation or low cost

Create uncontested market space

Make the competition irrelevant

Create and capture new demand

Break the value-cost trade-off

Align the whole system of a firm's activities in pursuit of differentiation and low cost

Compete in existing market space

Make the value-cost trade-off

Align the whole system of a firm's activities with its strategic choice of differentiation or low cost

Create uncontested market space

Make the competition irrelevant

Create and capture new demand

Break the value-cost trade-off

Align the whole system of a firm's activities in pursuit of differentiation and low cost

Fundamental differences between red ocean strategy and blue ocean strategy

To sustain themselves in the marketplace, red ocean strategists focus on building advantages over the competition, usually by assessing what competitors do and striving to do it better. Here, grabbing a bigger share of a finite market is seen as a zero-sum game in which one company’s gain is achieved at another company’s loss. They focus on dividing up the red ocean, where growth is increasingly limited. Such strategic thinking leads firms to divide industries into attractive and unattractive ones and to decide accordingly whether or not to enter.

Blue ocean strategists recognize that market boundaries exist only in managers’ minds, and they do not let existing market structures limit their thinking. To them, extra demand is out there, largely untapped. The crux of the problem is how to create it. This, in turn, requires a shift of attention from supply to demand, from a focus on competing to a focus on creating innovative value to unlock new demand. This is achieved via the simultaneous pursuit of differentiation and low cost.

Under blue ocean strategy, there is scarcely an attractive or unattractive industry per se because the level of industry attractiveness can be altered through companies’ conscientious efforts. As market structure is changed by breaking the value-cost trade-off, so are the rules of the game. Competition in the old game is therefore rendered irrelevant. By expanding the demand side of the economy new wealth is created. Such a strategy, therefore, allows firms to largely play a non–zero-sum game, with high pay-off possibilities.