how a blue ocean works
in an established industry companies compete with each other for every piece of available market share the competition is often so intense that some firms cannot sustain themselves this type of industry describes a red ocean representing a saturated market bloodied by competition 1blue oceans offer the opposite many firms choose to innovate or expand in the hopes of finding a blue ocean market with uncontested competition blue ocean markets are also of high interest to entrepreneurs overall blue ocean markets have several characteristics that innovators and entrepreneurs love a pure blue ocean market has no competitors a blue ocean market business leader has first mover advantages cost advantages in marketing with no competition the ability to set prices without competitive constraints and the flexibility to take its offering in various directions business leaders with innovative products and services who can identify blue ocean markets have endless opportunities blue ocean vs red ocean strategiesin contrast to a blue ocean a red ocean describes an environment of cutthroat competition among many industry players because the marketplace is crowded with rivals new companies must fight fiercely for a share of any profits companies in a red ocean business environment will use very different business strategies than those that have a marketplace to themselves rather than try to create demand red ocean companies try to attract existing consumers through marketing lower prices or improved products for example consider the marketplace for car insurance most insurers sell nearly identical products and try to capture market share by offering a more attractive deal than their competitors examples of blue ocean companiesa blue ocean is specific to a time and place ford and apple are two examples of leading companies that created their blue oceans by pursuing high product differentiation at a relatively low cost which also raised the barriers for competition they also were paradigmatic of burgeoning industries at the time that were later exemplified and emulated by others in 1908 ford motor co introduced the model t as the car for the masses it only came in one color and one model but it was reliable durable and affordable 3at the time the automobile industry was still in its infancy with approximately 500 automakers producing custom made cars that were more expensive and less reliable ford created a new manufacturing process for mass producing standardized cars at a fraction of the price of its competitors the model t s market share jumped from 9 in 1908 to 61 in 1921 officially replacing the horse drawn carriage as the principal mode of transportation 4apple inc found a blue ocean with its itunes music download service while billions of music files were being downloaded each month illegally apple created the first legal format for downloading music in 2003 5it was easy to use providing users with the ability to buy individual songs at a reasonable price apple won over millions of music listeners who had been pirating music by offering higher quality sound along with search and navigation functions apple made itunes a win win win for the music producers music listeners and apple by creating a new stream of revenue from a new market while providing more convenient access to music 5another example of a blue ocean firm is netflix a company that reinvented the entertainment industry in the 2000s rather than enter the competitive marketplace of video rental stores netflix created new models of entertainment first by introducing mail order video rentals and later by pioneering the first streaming video platform paid for by user subscriptions following their success many other companies have followed in netflix s footsteps as a result any new company trying to launch a video subscription model will find itself facing a red ocean rather than a blue one the bottom linea blue ocean describes an entrepreneur s dream an unexplored market without any competition allowing innovators to create and introduce new products that capture a large share of the market however a blue ocean is not always easy sailing entrepreneurs who seek to employ a blue ocean strategy must first create their own market attract customers and develop a product that has never been tried before for that reason successful blue ocean opportunities can be rare and far between 