We all must have heard about these two words somewhere, Red Ocean and Blue Ocean. Here is my take on what they mean in possibly the easiest way.
Assume, the market is an ocean, and hence the whole market ocean can be categorized into two types. Depending upon which ocean market your firm is operating, your strategies will be different. So let's delve deeper.
Red Ocean: means the market that already exists (the known), and some players are already established here and fighting among themselves for more market share. The term 'Red' signifies the cut-throat competition, which makes the 'market ocean' bloody red. Here there is a fixed pie of profit which different firms fight for. Since there already exists a market hence, it is easy to enter this market space. Ex: Uber Eat's entering India's food delivery space.
Blue Ocean: means the market that is still unknown, maybe products and industries that are yet to come up. There are no players here, and the need is to create demand here. The term 'Blue' signifies the unlimited growth potential and opportunity one firm has over here. Here there is ample opportunity for profit-making, and firms can capture them easily. Even though everything seems so positive about the blue ocean, the difficulty is in finding the 'unknown market.' Example: Swiggy entering the food delivery space by creating it or Uber creating the ride-hailing service industry.
Now, we have seen the basic definition of both, moving onto the advantages and disadvantages of each type.
Red Ocean:
Advantages: 1. Already established market
2. Demand is already there
2. Demand is already there
Disadvantages: 1. Cut-throat competition
2. Already established leaders will use their power to not allow other players
2. Already established leaders will use their power to not allow other players
Blue Ocean:
Advantages: 1. High profit-making chances
2. Being the leader and creating a brand name
2. Being the leader and creating a brand name
Disadvantages: 1. Demand has to created
2. A significant investment is required
3. Eventually turns into a red ocean
4. Less number of success stories
Finally, It depends on which market ocean you are, but it is to keep in mind that a firm operating in the Red ocean must look out for Blue Ocean themselves or be vigilante about their competitors doing the same. A firm in Blue ocean is at a disadvantage in one way that any new firm can follow their steps without investing the money they had done. Hence they must be as disruptive as possible to be the incumbent player.
2. A significant investment is required
3. Eventually turns into a red ocean
4. Less number of success stories
Finally, It depends on which market ocean you are, but it is to keep in mind that a firm operating in the Red ocean must look out for Blue Ocean themselves or be vigilante about their competitors doing the same. A firm in Blue ocean is at a disadvantage in one way that any new firm can follow their steps without investing the money they had done. Hence they must be as disruptive as possible to be the incumbent player.
Please feel free to comment, criticism is highly appreciated.
