If we think of the market as an oceanand all the competing organisations as sharks fighting against each other andstriving to survive, then naturally the bloodshed will make the ocean turn red.
This is the primary reason for calling the competing strategies adopted byorganisations as Red Ocean Strategies.Red oceans represents the known market space – all the industries that are in existencetoday. The industry boundaries are well defined and accepted, and the playersunderstand the competitive rules of the game very well. Herein, the companiestry to surpass their rivals in order to capture a greater share of existingdemand. But the prospects for growth and profits gets reduced as the space getsmore and more crowded. Products becomes commodities, and rising competitionturns the water bloody. However, prospects in alreadyestablished market spaces – red oceans are narrowing down very steadily. Due toglobalisation and technological advances, industrial productivity havesubstantially improved.
Also, niche markets and monopoly havens are continuingto disappear with the fall in trade barriers between nations and globalavailability of information on products and prices (Ohmae, 1990). At the sametime there is little evidence to support any increase in demand, at least indeveloped nations. This has resulted in a situation of supply overtakingdemand. Thus, traditional competitive-based strategies while necessary, are notsufficient to sustain high performance (Kim and Mauborgne, 2005).
In order toachieve superior profitability and grab growth opportunities, companies arerequired to establish blue oceans.Blue Ocean representsthe unknown market space – all the industries that are not in existence today.Demand is created rather than fought over. Competition is irrelevant and thereis ample opportunity for profitable and rapid growth. Blue oceans can becreated in two ways. Sometimes, companies can give rise to completely newindustries. But mostly, a company alters the boundaries of an existing industryand thus creates a blue ocean from within a red ocean. The strategic moves that leads tocreation of blue oceans show several common characteristics.
Blue oceans areseldom the result of technological innovation per se but results from linkingalready existing technology to what buyers value. And this is true even forindustries that are technology intensive. The view that blue oceans can becreated by only new entrants has often been challenged.
In fact, it has beenseen that most blue oceans are created by incumbents and that too usuallywithin their core businesses. Creation of blue oceans leads to building of powerfulbrands that lasts for decades. Kim and Mauborgne found that creators of blueoceans never use competition as a benchmark. Instead, they make it irrelevantby breaking the cost/value trade-off. Successful companies pursue low cost andproduct differentiation simultaneously.
Cost savings come from reducing andeliminating the factors that an industry competes on. And value additionresults from raising elements that the industry has never offered.Blue ocean strategy creates economicas well as cognitive barriers to imitations and thus enables the companies toreap the benefits for a long period of time without any credible challenges.This happens because blue ocean creators attract customers in huge numberswhich enables them to generate economies of scale and thus put would-beimitators at a significant cost advantage. Also, imitating a whole system ofactivities is not an easy task.
At times, when a company offers a jump invalue, it earns a loyal following and a brand buzz in the marketplace. In suchsituations, the imitator may find difficulty in unseating the blue oceancreator or may find it conflicting with their existing brand image.Just as Blue OceanStrategy claims that a Red Ocean Strategy does not guarantee success for afirm, a Purple Ocean Strategy statesthat Blue Ocean Strategy may not promise business success in the long-run sinceBlue Ocean will turn red ultimately. Both red oceans and blue oceans haveco-existed always. Purple Oceans are formed wherever these two overlap. Cavagnettoand Gahir (2013) argued that there are no permanent Blue Oceans in reality. TheBlue oceans turn red whenever competitors begin to innovate past the blue oceancreator, or imitate them or capture a niche in the new market.
When marketsbecome completely Red Oceans, players will choose to exit due to intensecompetition and lower profitability. Therefore, it is seen that players aresituated somewhere in the middle of Red and Blue oceans – The Purple Oceans. ThePurple Ocean Strategy believes that a firm requires both innovative ideas aswell as a range of strategies to compete with rivalry and remain functional. Thus, by adopting both the strategiesconcurrently, we achieved a new type of strategy i.e., purple strategy which isthe fusion and combination of both the red and blue ocean strategy. It act asthe new colour of the business for an exciting new future for business.However, as can be seen that all thesestrategies tend to give results in a long span of time.
What about thosesituations where a firm is faced with a very high intensity problem that needsto be dealt with very quickly in a very short period. The relief comes from BlackOcean Strategy. As the name itself suggests, black ocean strategyinvolves some kind of black magic that enables an organisation to foreseeproblems well in advance and solve them successfully to continue to survive inits business market. Aithal and Kumar (2015) developed this concept systematicallybased on their observation and focussed group study and also they also studied thecharacteristics and conditions of this model of decision making.Organisations that have the objectiveof quick progression without much of ethical bothering, or environmentalbothering and those which are impacted by some sort of sustainability dangersdue to economic, social, political or environmental issues are more likely touse Black Ocean Strategy. Also, firms that face problems in starting a businessdue to volatility in socio-environmental conditions, or adverse impacts of lawsof the land, corrupt government officials & bureaucratic sanctions, unethicaltendency of stakeholders, and other such reasons follow this type of strategyin order to survive. Those organisations which are already set-up and wants toestablish its presence in the marketplace quickly by inorganic means takingover other existing competitors are also prone to use a Black Ocean Strategy.All such organisations rely on the use of influence, or bribery, or other suchmeans to achieve their short term objectives like gaining monopoly rights,fooling shareholders or government in terms of profit sharing, to get certainapprovals from the law of land, availing tax benefits etc.