Blue and Red Oceans: Creating New Market Space

The Concept of the “Blue Ocean Strategy”

Kim Chan and Renée Mauborgne, in their book “Blue Ocean Strategy” (2005), proposed an alternative to competitive struggle in “red oceans”—industries with established rules of competition where companies fight over the same pie.

Red ocean — existing industries with tough competition. Players divide a known market; as competition intensifies, profit falls. Companies are forced to choose: value or cost (trade-off).

Blue ocean — undiscovered market space. It is created, not found. Rules of competition do not yet exist. Value and cost do not contradict each other.

“Eliminate-Reduce-Raise-Create” Framework

A tool for creating a blue ocean is the search for a new value curve through four questions:

Eliminate: Which factors taken for granted by the industry can be completely eliminated?

Reduce: Which factors can be reduced significantly below the industry standard?

Raise: Which factors should be raised significantly above the industry standard?

Create: Which factors, never offered by the industry, should be created?

Cirque du Soleil: eliminated — animals, celebrity acts; reduced — risk and danger, comedic element; raised — artistic perfection; created — theme, storyline, cultural environment. Result: a new market at the intersection of circus and theater, without direct competition.

Three Characteristics of a Good Strategy

The blue ocean strategy is embodied in a value curve with three properties:

1. Focus — not everything is equally important
2. Divergence — the curve is different from competitors’ curves
3. A clear message — a distinct and convincing explanation of the value proposition

Practical Assignment

Consider any traditional industry (banking, retail, education, healthcare). By applying the “Eliminate-Reduce-Raise-Create” framework, propose a concept for a new entrant who creates a blue ocean. Draw the value curve.