1. What is a blue ocean strategy? What is a red ocean strategy? Explain these from the perspective of company, competition, costs, and markets.
Blue oceans mean that one industry has not existed in the world. This is an unknown market space in the industry. In the market space, there has no competition or just a little competition. In blue oceans strategy, market demands come from innovation rather than fierce competitions. From the perspective of company, Blue ocean strategy need the companies have differentiation strategy to find value creation. Also, the companies need to find a new market which has relative little competition and have enormous profit and potential. In Blue Ocean, due to there almost have no rivals in the industries, companies can earn a very large market which is benefit for the companies to control the costs of product and human resources. At the same time, the most important thing in Blue Ocean is to find and create new customers’ need and to constantly keep the product having value creation in order to meet customers’ requirements.
Red oceans denote all the industries in existence today which is a fierce competitive market. In red oceans, every industry boundary has been defined and accepted. Meanwhile, the rule of competition also has been known in the world. However, in Red Oceans, companies attempt to defeat opponent in order to earn much more market share from them. In Red Oceans Strategy, competitions are the core value and core strategy. Thus, one effective way to earn more market share is to increase sales costs or reduce profit. In red oceans, due to the market is over crowd, the profit and development prospect is not very well.
2. The authors allude to the fact that most companies borrow their strategic thinking from military models (see ‘Paradox of strategy’). How does this model affect perceptions related to competition and customers and what are the implications for creating value for markets (and