Red Ocean & Blue Ocean Strategy Examples & Difference in 2022

Red Ocean Strategy and Blue Ocean Strategy Examples & Difference in 2022. 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.

Characteristics of Red Ocean Strategy

Firstly, the red ocean strategy focuses on competing in the existing market. So, multiple companies compete with each other to achieve competitive advantages. The marketing team pursues both product cost and differentiation to beat other companies. Additionally, the company is intended to provide better service to buyers. Finally, they more attention to the current customers instead of looking for new clients.

For example, Malaysia 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 vs. Blue Ocean Strategy. Difference Between Red Ocean and Blue Ocean Strategy. Difference Between Red Ocean and Blue Ocean Strategy. Red Ocean vs Blue Ocean Strategy.
Red Ocean vs 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.
Difference Between Red Ocean and Blue Ocean Strategy
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.
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.

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.

Four Action Framework Examples
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.

Five Dimensions of Service Quality- Servqual Model of Service Quality

5 Dimensions of Service Quality- SERVQUAL Model. Servqual model of service quality, also RATER model. The Five Dimensions of Service Quality are Reliability, Assurance, Tangibles, Empathy, also Responsiveness.

Five Dimensions of Service Quality

The 5 Dimensions of Service Quality refers to the SERVQUAL Model of 5 key service dimensions, such as Reliability, Assurance, Tangibles, Empathy, and Responsiveness. Servqual model or five dimensions of service quality is also known as the Service Quality Model.  SERVQUAL Model is a multi-dimensional research process intended to measure the gap scores between expected and perceptions of service quality of the customers based on five dimensions. The three American marketing scholars A Parsu Parasuraman, Valarie A. Zeithaml, and Leonard L Berry, produced and implemented this model.

Therefore, the five service quality dimension model is also known as the SERVQUAL Model or RATER model introduced between 1983 and 1988.

SERVQUAL Model

Servqual model refers to the five dimensions of the service quality that measure the customer’s expectations. The Servqual model classifies the elements or components of service quality known as five critical service quality dimensions. Although the model developers initially proposed ten service quality dimensions, many experts later finalize only five dimensions of service quality: reliability, assurance, tangibles, empathy, and responsiveness. The marketing students formed an acronym RATER from the first capital letter of every dimension or component. However, this model recommends the most common causes of service quality problems after measuring the gaps.

Servqual Model 10 Dimensions

However, Initially, the introducers of the Servqual model proposed ten dimensions of service quality that are as follows:  Reliability, Responsiveness, Competence, Access, Courtesy, Communication, Credibility, Security, Knowing the Customer,  also, Tangibles.

5 Dimensions of Service Quality- SERVQUAL Model. 5 Dimensions of Service Quality Example are Reliability, Assurance, Tangibles, Empathy, Responsiveness. 5 components of service quality. 5 dimensions of service.
Figure 1: 5 Dimensions of Service Quality- SERVQUAL Model

Dimensions of Service Quality

The 5 Dimensions of Service Quality are
  1. Reliability
  2. Assurance
  3. Tangibles
  4. Empathy
  5. Responsiveness.
1. Reliability

Reliability is an essential dimension of the Servqual model that confirms the capacity to provide services exactly, on time, and credibly. Consistency is a critical factor for providing assistance or product to the customers on time with error-free conditions. You have to respect the commitment to give your service on time accurately as you promised to them.

For example, the organization is sending mail to the customers every day on time.

2. Assurance

Assurance means creating trust and credibility for the customers. It depends on the employee’s technical knowledge, practical communication skills, courtesy, credibility, competency, and professionalism. Therefore, these skills will help the organization to gain customer trust and credibility.

The assurance dimension combines four factors; for example, competence, courtesy, credibility, and security. Firstly, competence means having the requisite skills and knowledge.
Courtesy refers to the politeness, respect, consideration, and friendliness of contact staff.
Credibility is the trustworthiness, believability, and honesty of the staff.
Finally, security means freedom from danger, risk, or doubt.

Example of the assurance dimension

The employee is showing respect and being polite to the customers while servicing them.

3. Tangibles

Tangibles represent the physical facilities, employees’ appearance, equipment, machines, and information system. It focuses on facilitating materials and physical facilities.

For example, the organization maintains a clean environment, and staff follows the appropriate dress code.

4. Empathy

Empathy means focusing on the customers attentively to ensure caring and distinguishing service. It is an essential attitude in some countries in the world to serve every customer individually. It is also a great process to satisfy customers psychologically and increase confidence, trust, and loyalty. The company might lose its customers due to the lack of empathy inside the employees; therefore, they need to ensure compassion.

Additionally, empathy is a combination of the following factors:

  • Access (physical and social) – (For example, approachable and ease of contact).
  • Communication – (For instance, keeping customers informed in a language they understand and listening to them).
  • Understanding the customer – ( For example, making an effort to get to know customers and their specific needs).

For example, they are an active listener when customers are speaking and recognizing regular customers by name.

5. Responsiveness

Responsiveness refers to the eagerness to assist customers with respect and provide quick service to satisfy. This dimension focuses on the two essential factors, including willingness and promptness. So, you have to ensure that the customer is getting their service quickly without delay and make the customers feel that you are very interested in helping them. Responsiveness will be defined by the length of time when customers wait for the answer or solution. In short, responsiveness solves the customer problem as soon as possible by providing expected information or replacing products.

Example of the Responsiveness Dimension

The employee keeps no customer in waiting serial and replaces the product quickly before finishing the promised period.

SERVQUAL Instrument

The instruments of the SERVQUAL Model consist of 22 perceptions items. The author has used these instruments to evaluate consumers’ thoughts and expectations regarding the quality of service. The developers of the Servqual model designed 22 perceptions items also 22 expectation items to set into five dimensions of service quality. The gap score of the customers will come out ideally.

SERVQUAL Questionnaire Example
Servqual instruments- 22 scale items
Figure 2: SERVQUAL Instrument- 22 Scales Items

The 5 Gaps of Service Quality are Knowledge Gap, Policy Gap, Communication Gap, Delivery Gap, and Customer Gap.

In conclusion, the Servqual Model or Service Quality Model has become very popular and worldwide accepted because of increasing the customers’ service quality. It is a multi-dimensional research system that represents a customer satisfaction framework to satisfy customers and stakeholders.

Citation For This Article (APA 7th Edition)
Kobiruzzaman, M. M. (2021, September 6). Five Dimensions of Service Quality- Servqual Model of Service Quality. Newsmoor- Best Online Learning Platform. https://newsmoor.com/servqual-model-five-key-service-dimensions-servqual-gaps-reasons/