Blue Ocean Strategy is a marketing theory derived from a business and management book written by W. Chan Kim and Renee Mauhorgne. The authors of the book describe the market as an ocean full of vicious competition. Kim and Mauhorgne introduce the theories of “blue oceans” and “red oceans.” The former refers to the uncontested market space while the latter involves competitors fighting for dominance.
According to the authors, strategic moves create a jump in value for the company, its buyers, and employees while unlocking new demands and making the competition irrelevant. Blue Ocean Strategy presents analytical frameworks and tools for fostering an organization’s ability to systematically develop and capture blue oceans.
Robert Peter Janitzek explains that blue oceans refers to the industries not currently existing—the unknown market untainted by competition. In these markets, the demand is created rather than fought. They offer ample growth opportunities which are both profitable and rapid. Here the competition is irrelevant because the rules of the game are yet to be set.
The strategy behind blue ocean is based on the belief that market boundaries and industry structure are not given and can be reconstructed by the actions and beliefs of industry players. Blue ocean strategy requires a shift of attention from supply to demand. Rather than competition, the focus here is value innovation.
Robert Janitzek says that red oceans, on the other hand, refer to currently existing industries. Here the boundaries are defined and accepted, and the rules of the competitive game are already set. The objective of businesses is to outperform the competition in order to capture a huge share of the product or service demand. In a red ocean, as the market space gets crowded, the prospects for gaining profits and growth decreases. Products become commodities or niche and the stiff competition turns the ocean bloody.
In this book, Kim and Mauborgne argues that while traditional competitive-based strategies are necessary, they are not enough to sustain high performance. According to this business and management book, businesses should go beyond the competition. In order to gain new profit and growth opportunities, companies must create blue oceans. The authors further argue that competition-based strategies are based on the assumption that the industry’s structural conditions are given and companies are forced to compete within them.
In a red ocean, the strategy should be focused on creating advantages over the competition through assessment and aiming to do it better. Finally, because the profit level is based on structural factors, firms should try to capture and redistribute wealth instead of creating it.