A red ocean strategy is a business and sales tactic in which a company attempts to compete in a market with many competitors.
There are many potential buyers in such a market. However, to be able to sell their products, companies need to make a reasonably laborious effort.
Some companies then offer their products at lower prices. Some try to give different values to their products.
So, to find out more about a red ocean strategy, an example of its application, and how it differs from a blue ocean strategy, read this article further, okay?
What is the Red Ocean Strategy?
Launching Harappa’s red ocean strategy is a plan to make a product survive (and succeed in gaining profit) in a competitive market.
Companies that implement this strategy aim to be able to excel in the competition.
Businesses that use a red ocean strategy have several unique characteristics. These characteristics are related to the business decisions they make, which include the following:
- Companies try to compete in a market that has been created (a mature market).
- Businesses strive to focus on strategic focus to provide a different value proposition or pricing products cheaper than competitors.
- The company seeks to exploit the existing demand in the red ocean market. I am not trying to create new requests.
- They are working hard to improve the quality of execution to be able to acquire customers.
Examples of Application of Red Ocean Strategy
The advantage of implementing the red ocean strategy is that the company knows customers’ needs in the market.
This becomes essential information that is useful for making business decisions. Unfortunately, on the other hand, the conditions of competition in the market are so tight and fierce.
According to Harappa, implementing the red ocean strategy will be successful if the company believes in the products and tactics they have created.
Well, below are two examples of the successful implementation of the red ocean strategy :
RyanAir, an airline from Europe, applies a red ocean strategy to get consumers in the aviation market.
It chose to be an airline service that offered the cheapest fares to its competitors, and that strategy paid off well.
Launching a Startup Talky source, Apple is one of the companies that has successfully implemented a red ocean strategy.
The company launched the iPhone in 2007 when the mobile phone market was dominated by companies such as Nokia, Sony, and Motorola.
What Apple offers is nothing but a product that has a better value.
The iPhone devices they released at that time already had 2G technology, a sophistication that competitors’ products did not have then.
The Origin of the Term Red Ocean
The red ocean is a term coined by two business theorists named W. Chan Kim and Renée Mauborgne in their book Blue Ocean Strategy (2004).
Kim and Mauborgne describe the conditions of a very competitive traditional market with the term red ocean.
In the red ocean market, all businesses compete to compete with their rivals to seize the public demand in the market.
Market conditions that are so filled with many businesses (and their products are competing against each other) can have an impact on decreasing profits and weakening the growth of these businesses.
The competition for products in the market leads to ‘slashing each other’ or ‘bloody’ competition. That analogy is the basis for Kim and Mauborgne to use the term red ocean.
Kim and Mauborgne also argue that traditional business strategies based on competition ( red ocean strategy ) will find it challenging to maintain their good performance continuously.
Therefore, they proposed a blue ocean strategy as a solution.
Difference between Red Ocean Strategy and Blue Ocean Strategy
The blue ocean strategy has a very significant difference from the red ocean strategy.
Launching Launch Market, blue ocean strategy is a business tactic that seeks to create unprecedented demand rather than fighting fiercely with other companies.
The key to the successful implementation of the blue ocean strategy is none other than looking for new market opportunities and trying to eliminate relevant competition there.
When using a blue ocean strategy, businesses don’t need to make sure value propositions or lower prices.
According to the official website of Blue Ocean Strategy, the condition of the blue ocean market does not have tight competition because the game’s rules are still waiting to be determined.
The term blue ocean itself is an analogy that describes the potential for a broader and deeper market space that has not been explored and is still waiting to be discovered.
Even though the blue ocean market looks more promising than the red ocean market, doing a business pivot in that direction can be considered a potential risk that is not small.
Especially for businesses that are already established and comfortable in the red ocean.
It can also be said that the blue ocean market will be more suitable for startup companies or businesses with a solid vision to innovate and are ready to be agile.