Red Ocean Strategy: Meaning, Benefits & How it Works

Last Updated: 21 Jan 2025

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.

Difference between Red Ocean Strategy and Blue Ocean Strategy

The red ocean strategy should not be confused with the blue ocean strategy. Check out the differences in the table below:

Aspect	Red Ocean Strategy	Blue Ocean Strategy
Market Space	Competes in existing market space	Creates new market space (uncontested market space)
Competition	Highly competitive, with companies fighting for market share	Avoids competition by creating new demand and markets
Market Boundaries	Defined and stable; companies operate within industry boundaries	Undefined, with opportunities to redefine the market
Focus	Focus on outperforming rivals to capture a larger share of existing demand	Focus on creating new demand and making competition irrelevant
Approach	Exploit existing demand and focus on efficiency	Create and capture new demand, making competition irrelevant
Strategic Goal	Beat the competition	Make the competition irrelevant
Growth Potential	Limited, growth occurs by capturing share from competitors	High, as new markets and demand can be created from scratch
Risk	High, due to intense competition and price wars	Risk is in the unknown, but generally less price-sensitive
Innovation	Incremental innovation within the existing market context	Focus on value innovation, creating a leap in value for both the company and customers
Cost Structure	Often higher due to the need to compete on price and features	Can be lower due to the creation of differentiated products or services

Red Ocean Strategy Examples

One example of the red ocean strategy is the competition between Coca-Cola and Pepsi within the soda market. Both companies are constantly innovating and advertising to capture more market share. Similarly, in the smartphone market, Apple and Samsung compete against one another. They compete for customers by improving their products and spending on aggressive marketing. In these markets, companies are primarily concerned with crushing the competition rather than forming new demand.

Frequently Asked Questions

How can companies adopt the Red Ocean Strategy?

With the red ocean strategy, you can always add something new to your product that can set it apart from similar products, even in a highly competitive market. To win the red competition, you should not become obsessed with your rivals. Focus on improving your business instead.

The following five tips will help you to achieve superior product value and beat the competition.

• Don’t offer a product, offer a solution
• Find a new target audience
• Consider pricing
• Take care of your employees
• Advertise your product

What Are The Features of the Red Ocean Strategy?

• They focus on competing in a marketplace that already exists.
• They focus on beating the competition.
• They focus on exploiting existing demand.
• They focus on execution (better marketing, lower cost base etc)