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Whether it’s acquiring customers or establishing a brand, an organization has to go through several challenges to survive. They need to devise strategies that boost their market share. Red ocean strategy helps survival in a competitive market where organizations choose to grow aggressively rather than tap into an unexplored market space. Red ocean strategy is associated with operating in a known and crowded market space. Red ocean strategy examples demonstrate level of competition, associated risks and profit-making opportunities. A red ocean market is called so because of the cut-throat competition it witnesses.
Let’s find out the red ocean strategy meaning in greater detail.
Red Ocean Strategy Meaning
Red ocean strategy is a plan of action to make a product survive (and make profits) in a competitive market. The strategy aims to beat the competition. Red ocean strategy examples show certain characteristics associated with red ocean theory. They are:
- Organizations compete in an already-existing marketplace
- The focus is on value/cost trade-off. An organization can decide whether to create more value for customers at higher costs or not
- Organizations exploit the existing demand in a red ocean market
- Quality of execution is improved
Red ocean strategy examples tell us that an organization must choose between low cost and differentiation. According to the red ocean theory, they’ll have to align all their activities in a specific strategic direction.
Red Ocean Strategy Examples
Red ocean strategy gives a clear view of customer needs in an established market. It’s a big advantage, but the competition is fierce—every player is trying to carve out a niche for themselves by offering better quality and deals. A red ocean strategy will work if the organization has faith in its product and strategies. Let’s look at some examples to make the red ocean strategy meaning clearer.
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Reliance Jio
Reliance Jio entered a red ocean market in telecommunication with strong, established players Airtel and Vodafone. Well-versed with the red ocean strategy meaning, they offered unique deals and generous internet packs that eventually made Jio a market leader.
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Ryanair
Ryanair is a European airline that used the red ocean strategy to operate in a saturated market. They chose a low-cost model to offer basic air services and cheap airfares compared to their competitors.
It is difficult to challenge established competition. But, red ocean strategy examples such as Jio are proof that an organization can be successful in a red ocean market with the right strategies and products.
Red Ocean Traps
Red ocean theory is effective in fighting market competition, but managers must look for greener pastures (in this case, blue oceans). Red ocean traps are assumptions that managers make while devising market-centric strategies that can affect their ability to see market spaces with greater opportunities. There are six red ocean traps:
- Managers try to make existing customers happier, which prevents them from creating new markets and focusing on non-customers
- Focusing on a niche market can be profitable, but managers often fall for unsustainable strategies that make them lose customers and market share
- Organizations can focus on technology innovation, but they won’t see growth if market-creating strategies are weak
- A product may take the industry by storm and topple the leading competition, but it won’t assure a new market. Without strategies for market creation, organizations lose opportunities to make profits and establish their brand
- Organizations mistake differentiation for market creation and offer premium value for customers instead of eliminating factors to bring costs down
- Managers can consider low-cost strategies to be market-creating strategies and focus on cutting costs rather than customer value
Managers must identify red ocean traps that restrict them from entering promising market spaces. Getting the red ocean strategy meaning will take them closer to making profits in a highly saturated and competitive industry.
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Explore Harappa Diaries to learn more about topics such as Importance of Core Competencies for Organizational success, How To Improve Observation Skills, Common Barriers To Problem Solving and How to Use Issue Tree to classify problems and solve them efficiently.
