Red Ocean & Blue Ocean Strategy Examples & Difference in 2021

Red Ocean Strategy and Blue Ocean Strategy Examples & Difference in 2021. Difference Between Blue ocean and Red ocean strategy. Examples of Red Ocean and Blue Ocean Strategy. Also, Blue Ocean Strategy Four Action Framework.

Red Ocean Strategy

Red ocean strategy refers to the traditional marketing strategy to compete with the competitors. It is demonstrated when many companies compete to achieve a competitive advantage in the existing market. These companies contest in the same marketplace to beat their opponents. Red ocean strategy influences the company to provide better service to buyers. It mainly focuses on the existing customers and buyers rather than creating new customers. So, they provide better services and products to attract customers.

For example, Ryanair and Air Asia Airlines follow the red ocean strategy to beat their competitors.

Red Ocean Strategy Examples

Air Asia is a renowned airline company in Malaysia. It always tries to compete with other airline companies in Malaysia, for example, Firefly, Malindo, and Malaysia Airlines, to achieve competitive advantages. Air Asia offers low prices in domestic and international flights to beat the competitors. On the other hand, Malaysia Airlines also reduce the price to beat Air Asia. So, they fight each other in the same marketplace. It is a real-life example 0f the Blue Ocean Strategy.

Suppose we infer these giant companies with sharks and the marketplace with the ocean. So, imagine what will happen if all these sharks fight with each other. The ocean gets bloody due to the fierce fight of sharks.

Advantages of Red Ocean Strategy

Firstly, the market has already existed, so no need to create a new marketplace.

Secondly, the services and products have good demand by the customers. Many customers want the products; so, the new companies can utilize the existing consumers.

Additionally, the company can recruit skilled employees easily who have deep experience in the sector.

Finally, the new companies can get ideas on how to improve the business from their competitors.

Disadvantages of Red Ocean Strategy

Firstly, The competitors are experienced in this market so difficult to beat them.

Secondly, the company needs to focus on cost and differentiation, which is difficult for a new business.

Blue Ocean Strategy

Blue ocean strategy refers to the uncontested marketing policy that focuses more on the innovation to reinvent the business than the head-to-head competition.  W. Chan Kim and Renée Mauborgne together introduced the Blue ocean strategy in 2005. It is a simultaneous process of opening a new business market and creating new demand; therefore, competition is irrelevant.

Blue Ocean Strategy Examples

There are several examples of the blue ocean strategy worldwide. Many industries had accepted it to get benefits, such as Netflix, Canon, iTunes, Cemex, Philips, NetJets, Curves, JCDecaux, Quicken, Polo Ralph Lauren, etc. iTunes solved the problem recording industries when it started the business. Before launching iTunes, consumers download a song illegally from the internet platform. ITunes’s blues ocean strategy created a new way of selling music legally, where consumers and artists became mutually benefited. They managed to make a new category of music selling through digital music platforms for listeners. Still, it is dominating the marketplace of music platforms for years.

Netflix organizational change is the most appropriate example of the Blue Ocean strategy. Netflix changed its business model to create an uncontested new market. It is one of the most successful companies that accept the blue ocean strategy to achieve competitive advantages.

For example, Netflix, Canon, and iTunes follow the blue ocean strategy to achieve the competitive goal.

Blue and Red Ocean Strategy Examples

For example, you put some sharks in a pond. Now, they are fighting each other. The sharks are trying to kill others. A few hours later, you can see the water has been red for the shark’s blood. We can infer this pond to the red ocean where many companies are competing with each other.

On the other hand, you put a shark in a separate pond. There is no other shark that can fight, so the water is blue and fresh. We can infer it to the blue ocean strategy where only one company controls the marketplace.

Red Ocean Strategy and Blue Ocean Strategy- Difference Between Red Ocean and Blue Ocean strategy. What is the Blue ocean strategy? What is the Red Ocean Strategy? Blue and Red Ocean Strategy. Examples of Red Ocean and Blue Ocean Strategy.
Figure 1: Red Ocean Strategy and Blue Ocean Strategy

Red Ocean vs. Blue Ocean Strategy

Red Ocean Strategy
Blue Ocean Strategy
The contest is in the same market. Create an uncontested new market.
Many Companies compete with each other in the existing market. One Company dominates the new Market.
Beats competitors. Competitors are irrelevant.
The company pursues both cost and differentiation. The company chooses between cost and differentiation.
Make the value-cost trade-off. Break the value-cost trade-off.
Capture new demand. Exploit existing demand.
Focus on rivals within its industry. Focus across the alternative industry.
Intend to provide better service to buyers. Redefine the buyer group.
Focus on current customers. Focus on new customers.
The market is already established. Need to make the new market.
For example, Ryanair and Air Asia Airlines. For example, Netflix, Canon, and iTunes.
Red Ocean vs Blue Ocean strategy
Figure 2: Red Ocean vs. Blue Ocean Strategy
Difference Between Red Ocean and Blue Ocean Strategy
 1. Focus on Current Customers vs. Focus on New Customers

Most industries focus on attracting existing customers to sell more products and services in the red ocean strategy. Thus, they focus on the current customer to make a benefit by selling products and services.

In contrast, in the blue ocean strategy, the industry tries to change the business pattern to yield something new for the customers. The company also broadens the business area to develop new products or services; therefore, customers are irrelevant here. Thus, this strategy allows the company to focus on business patterns rather than customers.

2. Compete in Existing Markets vs. Create New Markets

From the red ocean strategy perspective, the industry is doing business with the customers where some industries gain more clients, and some other sectors lose clients. They are doing business among the same customers and competing with each other to get more customers. The company will earn more money if it can bring more customers to its umbrella.

The blue ocean strategy never suggests the company compete because it makes a new uncontested marketplace. The product and service are unique; therefore, no company will come to compete with you. So, this strategy creates an uncontested market to serve its customers.

3. Beat the Competitor vs. Make the Competitor Irrelevant

The competition must exist in the marketplace of the company that follows the red ocean strategy. They compete with each other to sell more products and services to increase profit margins. So, they always intend to beat the competitors through marketing policy, product quality, and services.

The blue ocean strategy makes the competition irrelevant because they need not compete with other industries to sell products and services. It makes a new marketplace for the industry.

The 8 Key Points of Blue Ocean Strategy

The eight key points of the Blue ocean strategy are as follows;

  1. It’s grounded in data.
  2. It pursues differentiation and low cost.
  3. Blue ocean creates an uncontested market space.
  4. It empowers you through tools & framework.
  5. Blue ocean strategy provides a step-by-step process.
  6. It maximizes opportunity while minimizing risks.
  7. Blue ocean also builds execution into strategy.
  8. It shows you how to create a win-win outcome.
Blue Ocean Strategy Four Action Framework

Chan Kim and Renée Mauborgne developed the four action framework to destroy the trade-off between low cost and differentiation and rebuild an industry’s strategic logic. The four Actions Template determines whether the investment money is properly used to maximize consumer gain and minimize consumer pain. It also assesses the gains that matter with this template and the pains that matter for your product. It is the best way of getting the most benefit with the least price within the total product market.

Blue Ocean Strategy Four Action Framework
Figure 3: Blue Ocean Strategy Four Action Framework

How to Use Four Action Templates

Eliminate

Firstly, you have to identify the factors of the industry that need to be eliminated because of defectiveness. Find out the elements where you give significant investment and effort but getting very little output. These factors can also be made more contributions in the past but are now useless, so you need to eliminate them because of becoming obsolete.

Reduce

Secondly, you need to identify factors that are unnecessary for the industry and cannot correctly benefit the industry. These factors are well below the industry’s standard. For example, the higher cost of manufacturing can reduce the product.

Raise

These are the significant factors that need to be increased to fulfill the industries well above standards. For example, to exceed the customer’s challenges, the company needs to rebuild the features.

Create

These are the new features that the company never provided. To create these new features, you need to investigate the customer’s desire to fulfill them. The industry also can create new products or offer unique services for consumers in an innovative way. It will help the company to create a new marketplace distinguished from the competition.

Conclusion

In short, Red ocean strategy refers to competing for the existing marketplace, where the blue ocean strategy denotes making a new uncontested marketplace. Based on the discussion, it is safe to say that the blue ocean is a better way to bring fewer risks, more success, and increased profits. In addition, the four action templates appear as the best solution to identify the industry’s investment is properly or not. Hence, the blue ocean strategy and the four action framework have become innovative business innovations.

8 Principles of TQM- Total Quality Management (TQM) Tools Pros & Cons

8 Principles of TQM: The Eight Principles of Total Quality Management (TQM) are Customer Focus, Leadership, Involvement of People, Processes Approach, System approach to management, Continual improvement, Factual approach to decision-making, and Mutual beneficial supplier relationship.

Definition of the Quality

Quality means satisfying the demand of the customers by providing excellent products and services. Researchers defined quality in many ways, but the essence of the definition is almost similar. Edward described that “quality is the ability to exceed the customer’s satisfaction by providing service and product.” In addition, Crosby defined that “quality is conformance to the requirements of customers.” Moreover, Juran defined quality as being ‘fitness for use. So, quality is the standard or degree of the products or services that can differentiate them from others by measurement.

8 Practices of TQM

Total Quality Management (TQM)

Total Quality Management (TQM) refers to the management process that includes the commitment and dedication of every employee in the organization to maintain a high-level quality in every sector and attention to customer gratifications. The employees of the company have to be informed about the strategy before implementing it in the organization. In the mid-1980s, total quality management (TQM) was introduced based on the Company-Wide Quality Control (CWQC) and benchmarking process. Later, many scholars, such as Juran, Deming, and Ishikawa, gave their contributions to the practices and improved the content of TQM. The most important contributions of the TQM are Deming 14 points, Juran quality trilogy, and Ishikawa’s Fishbone diagram, and CWQC (Yang, 2012).

8 Practices of TQM- Total quality management (TQM)

Figure-1: Total Quality Management

Many worldwide companies practice the Total Quality Management (TQM) strategy, for example;

  • Ford Motor Company
  • Phillips Semiconductor
  • SGL Carbon
  • Motorola and
  • Toyota Motor Company.
The 8 Practices of TQM

The Eight Principles of Total Quality Management (TQM) are 1. Customer focus, 2. Leadership, 3. Involvement of people, 4. Processes Approach, 5. System approach to management, 6. Continual improvement,7. Factual approach to decision-making, and 8. Mutual beneficial supplier relationship.

In the mid-1990s, the eight basic principle or elements of the total quality management (TQM) was proposed by some well-known philosophers (Evans, 2013). These eight principles of TQM entirely work together to develop the process and to yield satisfaction for the customers.

Principle-1: Customer focus

The first and prime principle of total quality management (TQM) is to focus on the customers who are buying the products and services as well as potential customers. Customers are the people who justify the quality of the products and services. Customers will feel that they have spent their money on a quality product if it can last long to fulfill demands. You can exceed customer satisfaction only when you know their demands, so align company objectives with the client’s needs.

Principle-2: Leadership

Leadership is essential in maintaining unity among employees to achieve interdependent goals (Evans, 2013). Although there are mainly three types of leadership in the industry, the democratic leadership style is the best to perform well. Leaders can form a convenient environment to work effectively inside the organization, in which all employees work to achieve the organization’s goal.

Principle-3: Involvement of people

People from every level in the organization give their all-out efforts, dedication to the organization’s profits. The total employee commitment enables the industry to develop productivity, process and raise sales growth. So, all the employees in the organization have to be well-trained, committed, and dedicated to achieving an interdependent goal on time. The industry needs to create a responsive environment where every employee will be motivated to complete the task properly. The activeness, motivation, and retention of the employees can yield customer gratifications. The involvement of people can produce effective teamwork. According to Evans (2013), three types of teamwork are vertical, horizontal, and inter-organization.

Principle-4: Processes approach

The company needs to improve the process consistently to yield good output. A good result of the business from the processes approach can bring customer satisfaction. Hence, TQM focus on the process approach strongly to assure the quality of the product or service.

Principle-5: System approach to management

The total quality (TQM) highlights executing the strategy in a systematic approach. The industry makes a proper plan of implementation, and they collect data while applying those processes.

The International Organization for Standardization (ISO) describes this principle as:

“Identifying, understanding, and managing interrelated processes as a system contributes to the organization’s effectiveness and efficiency in achieving its objectives.”

Principle-6: Continual improvement

Continual improvement of the process is an essential step for every industry to make their customer are satisfied. Therefore, TQM assists the company in keeping watching the constant improvement of the system to improve the service and product of the industry.

Principle-7: Factual approach to decision-making

It eases the way of taking the decision based on the information collected from data. Making a decision based on the fact is an effective way to customer satisfaction. This principle uses the actual method to collect and analyze data.

Principle-8: Mutual beneficial supplier relationship

Usually, a business is conducted by multiple combined departments, and each of the departments is assigned individual tasks, although the function of these departments is interconnected. The total quality management process helps all sections work combined to achieve an interdependent objective. The company uses visual aids and flowcharts to understand how employees perform perfectly. Executing the total quality management (TQM) properly is not easy; TQM represents a significant cultural shift, so the company needs to implement it slowly and accurately (Evans, 2013).

In addition to the eight principles, effective communication is the fundamental principle to conduct business successfully. Everybody in the company has to be conscious of the plan, method, and strategy to achieve a goal. The risk of failure can increase due to the communication gap. Make sure that every employee is aware of their duty and involve them in the decision-making session. It will motivate the employees, letting them know that they are contributing to the industry. However, Effective communication reduces silos and increases coordination and cooperation.

The advantages of the 8 Principles of TQM

At first, Japan identified the advantages of total quality management (TQM) in the mid-1950s. After a few decades, the benefit of the TQM had been disclosed all over the world. The most important benefits of the TQM are:

  • Firstly, Develop the quality of products and services to satisfy customers.
  • Secondly, Motivate employees morally.
  • Thirdly, Boost productivity in the organization.
  • Fourthly, Reduce production costs and faults.
  • In addition, Raise profits margin.
  • Further, Make processes more efficient and reliable.
  • Moreover, it Involves employees.
  • Additionally, it Improves the condition of the work environment.
  • Finally, Improve the communication process.
Total Quality Management Tools

There are many tools of the TQM that help the industry to operate smoothly with profit. These tools can help the industry in many approaches. The most essential approaches are;

  • Firstly, Identify difficulties with quality.
  • Secondly, Analyze data.
  • Thirdly. Collect information.
  • Moreover, Identify the leading causes of the problems.
  • Finally, Assess the results.
Quality Strategy to Profitability in the Organization

Since the 1980s, many quality strategies or quality management systems have been launched to maintain the quality of the products and services in the organization, such as total quality management system (TQM), Six-sigma, reengineering, skeletal system, and so on (Yang, 2012). Yang (2012) argued that most of the quality improvement strategies had been executed by the company worldwide to yield good results by solving problems or faults.

The History and Evolution of Quality Management Strategies
  • Inspection quality control (IQC), since 1910
  • Statistical process control (SPC), since 1930
  • Total quality control (TQC), since 1950
  • Company-wide quality control (CWQC), since 1970
  • Total Quality Management (TQM), since 1985
  • Six-Sigma (6σ), since 1986
  • Business Excellence Model, since 2000
  • The development and implementation system of the DMAIC Six Sigma program

References:

Yang, C. C. (2012). The integration of TQM and Six-Sigma. Total Quality Management and Six Sigma, 219.

References
  • Evans, J. R. (2013). Quality & performance excellence. Cengage Learning.
  • Yang, C. C. (2012). The integration of TQM and Six-Sigma. Total Quality Management and Six Sigma, 219.
Citation for this Article (APA 7th Edition)

Kobiruzzaman, M. M. (2021). Total quality management (TQM): Eight Principles and Practices of TQM. Educational Website For Online Learning. https://newsmoor.com/total-quality-management-tqm-eight-principles-and-practices-of-tqm/