Case Study: 🔴 Red Ocean Strategy vs 🔵 Blue Ocean Strategy

I. Introduction

1. Red Ocean vs. Blue Ocean strategy was developed by W. Chan Kim and Renée Mauborgne and introduced in their 2005 book, Blue Ocean Strategy
2. Red Ocean Strategy = Compete in the existing market → fight for market share.
3. Blue Ocean Strategy = Create a new market → redefine boundaries and grow demand.
4. The suggestion of the model is to diversify into a market with less competition and growing demand

II. Case Study: 

Accepted wisdom holds that the less competition a business faces, the more it thrives. The concept is at the core of the Blue Ocean Strategy (Kim and Mauborgne, 2005) which advocates launching in the uncontested markets, in order to avoid pain of going head-to-head with rivals. Research shows that exposure to competition in early stages of a firm’s life increases its long-term survival prospects.

Companies established in crowded markets had a higher likelihood of failing in the first year than those started in less crowded markets. Early exposure to competition may immunize a company. How does a competition help firms in their youth thrive? A challenging environment causes startups to be tightly focused on satisfying customer needs along with lowering and containing costs. Many companies develop internal competition. Venture investors can help to create a similar dynamic by being careful not to overfund a new company, as having too much cash-on-hand can make it harder to establish a low-cost culture. Of course, early competition has a downside: some new businesses fail before they have time to build up immunity. Still managers of young businesses will bear in mind the advantages of exposure to safe levels of external competition or to a competitive environment that’s been generated inside the organization. Such exposure can have long-lasting positive effects on efficiency and survival.