What is the Red Ocean Strategy?

Businesses today strive to remain afloat amid fierce competition in their industry. One company has to level up against the other. In the end, it’s all about making profits. One of the strategies used by businesses to gain a competitive edge is the red ocean strategy. In a red ocean strategy, competition is typically fierce, and existing businesses compete to succeed in their respective industries.

Vehicle firms are an example of a red ocean company. All companies are fighting to solve the same problem or meet the same need as the consumers. In a highly competitive, it would be riskier for a new company, particularly a startup to survive. In India, Indigo and SpiceJet are instances of companies adopting the Red Ocean strategy; they offer low-cost airlines that have gained customers but are continually in direct competition with one another. It is the survival of the fittest on a global or national scale.

How does the Red Ocean Strategy work?

If you want to enter a market that is primarily aligned toward a red ocean strategy, you'll need to create a market disruption. By developing a novel/original product or service, you will be able to establish a specialized demand for your offering. This will help attract a majority of your customers' attention by causing a disturbance in the market, and it will then be up to your customers to stick to your brand.

Jio is a beautiful example of this. When it first entered the market, it caused a stir by offering free services, which disrupted the entire telecom business.

In a red ocean strategy, your brand's primary goal should be to outperform the competition to maximize the value and financial benefit by beating the competition and attracting customers to your brand.

Providing much value to your customers is one of the most powerful strategies to win over in such a market. While the competition may be between rival companies, the consumers remain at the core. They should get the most bang for their buck, which will help the company win over more than 60% of the market.

Benefits of red ocean strategies

Less Risky

The first and most important advantage of the red ocean strategy is that there is very little risk associated with adopting this strategy. When you have an established market, you don't need to create new demand for the product. Instead, you can focus solely on your competitors' pricing and customer service, as opposed to the blue ocean strategy, which requires the company to develop demand or find a new market for the product

Future Clarity

In the case of a red ocean strategy, the company has clarity regarding the market as well as the tastes and preferences of its customers, which allows the company to better focus on the product and marketing strategy. As opposed to a blue ocean strategy, it is like a black box because you never know what's in store in terms of market and consumer reaction to the product.

Requires limited resources

If a company has limited resources and follows the blue ocean strategy, it will never be able to do business again. With the red ocean strategy, there is a margin of safety. After all, the company operates in an already established market. In other words, organizations with limited resources should start with a red ocean strategy and then move on to a blue ocean plan once they have established themselves and are open to taking more risks.