To develop in a large traditional market, enterprises need to have a suitable business strategy. Red ocean strategy is a fairly familiar term. But many people do not understand what red ocean strategy is? The sharing below will help you understand along with some specific examples.
1. What is the red ocean strategy?
Red Ocean Strategy in English is Red Ocean Strategy.
A red ocean means a market in which there are several, even many, competitors.
Concept of red ocean strategy
Red oceans are traditional markets that have been filled with competition and have been well exploited. The competition in this environment is extremely fierce, because the rules have been clearly established, the market share has been divided and it is difficult to expand further.
A competition-based red ocean strategy assumes that the structural conditions of an industry are established and that firms are forced to compete under those conditions.
2. Red ocean strategy features
Red oceans are all industries that exist today – the market space is known. In red oceans, industry boundaries are defined and accepted, and the competitive rules of the game are known.
You can think of red as the blood of sharks that bite each other for delicious food, just like businesses fight for market share.
Red ocean strategy is a strategy aimed at fighting and defeating opponents. The red ocean strategy has the following basic characteristics:
- Firms focus on competing in an already existing market.
- Businesses focus on beating the competition.
- Businesses focus on the trade-off between value and cost.
The value-cost trade-off is the view that a company can choose between creating more value for customers at a higher cost or fair value for customers at a lower cost. than.
3. Difference between red ocean strategy and blue ocean
Red ocean strategy is familiar to every business, mentioned in the economy.
The difference between blue and red ocean strategy
Next to that is the blue ocean strategy created in 2004, by Chan Kim and Renée Mauborgne. Blue ocean strategy offers a completely new and different development opportunity for businesses.
Understanding the difference between red ocean strategy and blue ocean strategy will help you understand to find the right path for your company’s business strategy.
3.1 Market of business activities
A marketplace is where consumers shop, transact, and pay with your business. While with the Red Ocean strategy, businesses will focus on the current market, with fierce competition with rivals.
With Blue Ocean Strategy, businesses will focus on developing in markets that are not competitive or have very little competition. There, the winner will be you, customers will shop and choose your products and services, because there are too few competitors.
The Red Ocean strategy focuses on competing and beating the competition, creating quality, service experience or lower prices for customers to choose from.
With Blue Ocean Strategy, businesses will not focus on competition but make them unnecessary. Blue Ocean’s core goal is to create more compelling value at a lower cost.
3.3 Exploiting demand
The strategy for exploiting the needs of the red ocean and the blue ocean is also different. While Red Ocean Strategy focuses on exploiting old and existing needs, Blue Ocean creates new needs, exploiting new aspects that no other business has yet developed.
3.4 Value and cost balance
Red Ocean strategy focuses on balancing the two factors of value and cost, to attract customers’ choices. Blue Ocean Strategy breaks down 2 factors, bringing new values at the lowest cost to customers.
Based on the analysis of the above differences, it can be seen that the Blue Ocean Strategy will create more development opportunities for businesses.
However, not all businesses find and create new values, new markets, know how to break the balance of cost and value… Blue Ocean market does not last forever, any market There will also be more competition.
Each business needs to adjust its strategy accordingly, seize the moment to choose a Blue Ocean or Red Ocean strategy.
4. 3 important factors that make up a successful red ocean strategy
Developing Red Ocean Strategy with a lot of competition but not without a chance to succeed. Each business that builds a suitable business strategy will create a position and increase its ability to compete with competitors.
Note 3 important factors that make up an effective red ocean strategy in business:
- Creating value for quality products, satisfying user needs, with lower value. Balance cost and product value, target the right customer segment.
- Brand positioning, creating customer awareness about the business. Expand communication and marketing strategies to create trust for customers about the brand. With the digital economy era, businesses have many channels and opportunities to effectively build and position their brands. Consider, choose appropriate communication channels, balance the budget.
- Build a strategy based on competitor analysis, make a difference based on existing values.
5. Examples of successful red ocean strategies
When the blue ocean becomes attractive, attracting many businesses to participate in competition, the red ocean will appear. Here are some examples of successful red ocean strategies:
- Traditional taxi companies compete with technology taxis, providing a solution that knows the price in advance and does not increase it even during peak times or rainy days. This is a strategy that gives a competitive edge to many traditional taxi businesses.
- The banking sector has developed with many businesses, but many new banks have expanded, creating a position and competition in the market such as: TPBank, VPbank… The transformation of the model of combining technology, improving the competition for traditional banks.
Enterprises operating in the market with many competitors, require businesses to find the difference and create a competitive advantage in the market.
The above sharing about red ocean strategy is hoped to be useful for interested readers, building a suitable business strategy for businesses.