Red Ocean and Blue Ocean Strategy



In 2005, Professors Chan Kim and Renée Mauborgne introduced the concepts of Red Ocean and Blue Ocean in their international bestseller "Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant." The authors used the metaphor of the “Ocean” to describe two vast market situations:

Red Ocean: A fiercely competitive and turbulent market space, where too many rivals operate in the same industry, making it "bloody" like a red sea.

Blue Ocean: A relatively unknown and unused market space, clear and open like a blue sea — with little to no competition.

In simple terms, Red Ocean = heavy competition; Blue Ocean = little or no competition.

Traditional companies are usually accustomed to operating in Red Ocean environments, where businesses constantly compete for larger market share. The goal here is to survive in a competitive market by differentiating one’s products from the rest. Tactics include adding new features, targeting specific customer groups, providing excellent service, and reducing prices to win over customers.

In contrast, the Blue Ocean strategy doesn’t aim to beat competitors — in fact, competition is irrelevant. The goal is to venture into an entirely new path and create a business that hasn’t even been started yet. With no existing rivalry, there's less pressure on pricing or market capture — and if successful, the potential for profit and sales is massive.

Red Ocean Strategy Example

Fast-food chain McDonald's is a prime example of successful Red Ocean strategy. Despite numerous competitors in the fast-food space, McDonald’s entered the industry with unique product variations, strategic pricing, and creative commercials. Over time, their success became well-known.

By offering quality burgers made with fresh ingredients, along with a consistent business profile and authenticity, McDonald's has remained at the top.

Another Red Ocean example: Malaysia Airlines and AirAsia constantly use Red Ocean tactics to stay ahead of each other. AirAsia is a popular Malaysian airline that competes directly with Firefly, Malindo, and Malaysia Airlines by offering cheaper fares. In response, Malaysia Airlines also lowers its prices. Thus, they fight for dominance in the same market — a true representation of Red Ocean strategy.

Blue Ocean Strategy Example

A notable Blue Ocean success story is the Apple iPod. When Apple launched the iPod in 2001, it didn’t just introduce a new device — it created an entirely new product category: a digital music player that allowed users to carry and listen to thousands of songs on the go. In Steve Jobs’ words: “Let’s you put your entire music collection in your pocket and listen to it wherever you go.” Since they were the first to do this, Apple made huge profits in the early years.

Using the Blue Ocean strategy, Apple also succeeded with iTunes. Before iTunes, people downloaded music illegally. Apple created a legitimate digital music platform that benefited both users and artists — and iTunes became the market leader in digital music.

Another great Blue Ocean example is Netflix. By revolutionizing the way people watch movies and series, Netflix created a completely new business model and became one of the most successful companies using the Blue Ocean strategy.

Advantages of Red Ocean Strategy:

• The market is already established — no need to create a new one.
• Proven demand and customer base already exist for products and services.
• New businesses can study existing competitors to develop and improve ideas.
• Skilled professionals with deep sector knowledge are more readily available for hire.

Disadvantages of Red Ocean Strategy:

Established competitors are experienced, making them hard to beat.

Companies must heavily focus on cost vs. profit, which is especially difficult for startups.

Advantages of Blue Ocean Strategy:

• Little to no competition in the market.
• As the first mover, the company enjoys significant advantages and higher sales.
• Since there’s no competition, premium pricing is possible — leading to high profits.

Disadvantages of Blue Ocean Strategy:

Creating a new Blue Ocean idea is difficult and requires long-term research.

New ideas may not be accepted immediately or might fail to gain traction.

Entering a market too early can be risky if consumers take time to adopt the product — potentially resulting in losses and requiring time to earn customer trust.

Red Ocean

• Competes in existing markets
• Many competitors fighting in the same space
• Focus is on beating competitors
• Focus is on rivals
• Serves existing customers
• Market is already established
• Meets existing demand

Blue Ocean

• Creates entirely new markets
• One company dominates the market
• Competition is irrelevant
• Focus is on new industry creation
• Creates new customers
• Market needs to be created
• Creates new demand

In short, Red Ocean strategy refers to competing in an existing market, while Blue Ocean strategy is about creating an entirely new market. The real question isn’t whether Red Ocean or Blue Ocean is better — it’s which one will help you succeed.

Based on the discussion above, Blue Ocean strategy is an excellent path for safe and high-profit success with lower risk. However, if implemented effectively, Red Ocean strategy can also lead to great success and profitability. Both strategies can be effective depending on the situation and product.