Red Ocean & Blue Ocean Strategy Examples & Difference in 2023

Red Ocean Strategy and Blue Ocean Strategy Examples & Difference in 2023. 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 intended to provide better service to buyers—finally, they pay 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, Batik Air, and Malaysia Airlines, to achieve competitive advantages. Air Asia offers low prices on 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 quickly recruit skilled employees with deep experience in the sector.

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

Disadvantages of the Red Ocean Strategy

Firstly, competitors are experienced in this market, so it is 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 focusing more on innovation to reinvent the business than the head-to-head competition.  W. Chan Kim and Renée Mauborgne 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 legally selling music, where consumers and artists 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's organizational change is the most appropriate example of the Blue Ocean strategy. Netflix changed its business plan 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.

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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 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 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 customers where some industries gain more clients, and some other sectors lose clients. They are doing business with the same customers and competing with each other to get more customers. The company will earn more money if it can bring more customers under 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 company's marketplace that follows the red ocean strategy. They compete 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 critical 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 and frameworks.
  5. Blue Ocean's 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 used correctly to maximize consumer gain and minimize consumer pain. It also assesses the gains with this template and the pains that matter for your product. It is the best way to get the most benefit with the lowest 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 get 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 significant factors need to be increased to fulfill the industries well above standards. For example, the company needs to rebuild the features to exceed the customer's challenges.

Create

These are the new features that the company never provided. To create these new features, you must investigate the customer's desire to fulfill them. The industry can also create new products or offer innovative consumer services. It will help the company to create a new marketplace distinguished from the competition.

Conclusion

In short, the Red ocean strategy refers to competing for the existing marketplace, whereas 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 Questionnaires.

Five Dimensions of Service Quality

In 1985, three American marketing scholars, A Parsu Parasuraman, Valarie A. Zeithaml, and Leonard L Berry, established ten service quality dimensions based on customer evaluation. The customers evaluate the services received from organizations. Initially, the authors proposed 10 dimensions to assess service quality. Later, the authors condensed ten dimensions into five and introduced a refined SERVQUAL Model in 1988. 

The ten dimensions include Reliability, Tangibles, Responsiveness, Competence, Access, Courtesy, Communication, Credibility, Security, and Understanding. The five dimensions of service quality refer to the SERVQUAL Model of 5 key service dimensions: Reliability, Assurance, Tangibles, Empathy, and Responsiveness. The Servqual model or five service quality dimensions 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.

Therefore, the five-service quality dimension model was introduced in 1988 by A Parsu Parasuraman, Valarie A. Zeithaml, and Leonard L Berry. The researchers and practitioners use the latest servqual model.

SERVQUAL Model

The Servqual model refers to the five dimensions of service quality that measure the customer's expectations. The Servqual model classifies the elements or components of service quality known as the five critical service quality dimensions. Although the model developers initially proposed ten service quality dimensions, many experts later finalized 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, after measuring the gaps, this model recommends the most common causes of service quality problems.

Servqual Model 10 Dimensions

However, Initially, the authors of the Servqual model presented 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 in Servqual Model

Reliability is an essential dimension of the Servqual model that confirms the capacity to provide services exactly, on time, and credibly. It means the ability of a service provider to deliver services consistently and accurately, meeting customers' expectations every time. Consistency is critical for providing assistance or products to 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, Hotel Global Assistant prides itself on reliable and consistent service to its guests. One aspect of reliability is the hotel's commitment to ensuring that rooms are ready for check-in at the designated time, without any delays or errors.

Guests arriving at Hotel Global Assistant expect to be able to check into their rooms promptly upon arrival, based on their reservation. The hotel's front desk staff ensures that rooms are prepared well in advance, following a standardized process for cleaning, maintenance, and inspection.

Upon arrival, guests are greeted warmly by the front desk staff, who efficiently handle the check-in process. The staff members verify the guests' reservations, assign rooms according to their preferences, and provide them with keys promptly.

Throughout their stay, guests experience consistent and reliable service from the hotel staff. Housekeeping maintains the cleanliness and orderliness of the rooms, ensuring that amenities are replenished and any issues are promptly addressed. The hotel's facilities, such as restaurants, fitness centers, and business centers, operate smoothly and reliably, meeting guests' needs and expectations.

2. Assurance in Servqual Model

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 gain customer trust and credibility.

The assurance dimension combines four factors: Competence, Courtesy, Credibility, and Security. Firstly, competence means having the requisite skills and knowledge. Secondly, courtesy refers to contact staff's politeness, respect, consideration, and friendliness. Thirdly, credibility is the staff's trustworthiness, believability, and honesty. Finally, security means freedom from danger, risk, or doubt.

Example of Assurance Dimension in Servqual Model

The employee shows competence, courtesy, credibility, and security to the customers while servicing them.

Assurance Example in Retail Banking Services

In the context of retail banking services, the Assurance dimension of the SERVQUAL model plays a crucial role in building customer trust and confidence. Let's consider a scenario where a customer visits a bank branch to inquire about opening a new savings account:

Competence:

The customer approaches a bank representative and expresses interest in opening a savings account. The representative demonstrates competence by thoroughly explaining the different types of accounts available, their features, and the associated benefits. They are knowledgeable about the bank's products and services, providing accurate information to help the customer make an informed decision.

Courtesy:

The bank representative maintains a courteous and respectful demeanor throughout the interaction. They greet the customer warmly, listen attentively to their needs and preferences, and address any questions or concerns with patience and empathy. The customer feels valued and respected, contributing to a positive service experience.

Credibility:

The bank has established a reputation for reliability and integrity in the community. The representative reinforces this credibility by providing transparent information about account fees, interest rates, and terms and conditions. They assure the customer that the bank is committed to upholding ethical standards and safeguarding their financial interests, thereby earning their trust and confidence.

Security:

As the customer considers opening a new account, they express concerns about the security of their funds and personal information. The bank representative assures the customer that the bank employs robust security measures to protect against fraud, identity theft, and unauthorized access to accounts. They explain the various security features, such as encryption protocols, multi-factor authentication, and fraud monitoring systems, to reassure the customer of the bank's commitment to safeguarding their assets and privacy.

In this example, the Assurance dimension of the SERVQUAL model is exemplified through the bank's focus on competence, courtesy, credibility, and security in delivering retail banking services

3. Tangibles in Servqual Model

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

This dimension assesses the extent to which these tangible elements convey professionalism, competence, and attention to detail, influencing customers' perceptions of service quality.

The example of tangibles in the SERVQUAL model
  1. Physical Facilities: Tangibles encompass the physical environment where the service is delivered, including facilities such as buildings, furnishings, décor, and amenities. For example, a hotel's lobby, guest rooms, dining areas, and recreational facilities contribute to the tangible aspects of the service.
  2. Equipment and Tools: Tangibles also include the equipment and tools used to deliver the service. This may include machinery, technology, vehicles, and other resources necessary for service provision. For instance, in a car rental agency, the condition and cleanliness of rental vehicles are tangible factors that influence customer perceptions.
  3. Personnel Appearance: The appearance and grooming of service personnel contribute to tangibles. This includes factors such as attire, hygiene, professionalism, and demeanor. For instance, in a fine dining restaurant, the attire and presentation of waitstaff influence customers' perceptions of service quality.
  4. Communication Materials: Tangibles extend to communication materials such as brochures, signage, menus, websites, and other promotional materials. These materials should be well-designed, informative, and reflective of the organization's brand image and service offerings. For example, a travel agency's website should be user-friendly, visually appealing, and provide comprehensive information about travel destinations and services.
  5. Accessibility and Convenience: Tangibles also encompass factors related to accessibility and convenience for customers. This includes aspects such as parking facilities, ease of navigation within physical spaces, availability of amenities, and accessibility features for individuals with disabilities. For example, a retail store that offers ample parking, clear signage, and wheelchair ramps enhances the tangible aspects of the customer experience.

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

4. Empathy in the Servqual Model

Empathy refers to the service provider's ability to understand and address the needs and concerns of customers in a caring and personalized manner. It means focusing on the customers attentively to ensure caring and distinguishing service. 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 among 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, trying to get to know customers and their specific needs).
Example of Empathy in Servqual Model

For example, a customer contacts a telecommunications company's customer service department to report an issue with their internet connection. The customer explains that they are working from home and urgently need a stable internet connection to complete an important project. The customer service representative, demonstrating empathy, responds with understanding and concern for the customer's situation.

Instead of simply acknowledging the issue and providing generic troubleshooting steps, the representative actively listens to the customer's concerns and expresses empathy for the inconvenience caused by the internet outage. They reassure the customer that they understand the importance of reliable internet access, especially for remote work, and assure them that resolving the issue is a top priority.

The representative goes a step further by offering personalized assistance tailored to the customer's needs. They provide detailed guidance on troubleshooting steps specific to the customer's internet setup and offer to escalate the issue to technical support for further investigation. Additionally, they proactively offer to follow up with the customer to ensure that the problem is fully resolved and offer compensation for any inconvenience caused.

Through their empathetic response, the customer service representative demonstrates a genuine understanding of the customer's situation, instilling trust and confidence in the company's commitment to customer satisfaction.

5. Responsiveness in the Servqual Model

Responsiveness refers to the eagerness to assist customers with respect and provide quick service to satisfy them. 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. To ensure responsiveness in the service quality, the employee keeps no customer in the waiting serial and replaces the product quickly before finishing the promised period.

Example of the Responsiveness Dimension

For example, a customer visits a busy restaurant during peak hours and places an order for their meal. Despite the high volume of orders, the restaurant staff demonstrated responsiveness by promptly acknowledging the customer's order and providing an estimated wait time.

As the customer waits for their meal, they notice that their drink is running low. Before they even have a chance to flag down a server, a member of the restaurant staff proactively approaches their table to refill their drink and inquire if there's anything else they need.

Later, when the customer's meal takes longer than expected to arrive, the restaurant manager personally visits their table to apologize for the delay and assure them that their order is being expedited. The manager offers a complimentary appetizer as a gesture of goodwill for the inconvenience caused by the delay.

In this example, the restaurant staff demonstrates responsiveness by promptly addressing the customers' needs and concerns throughout their dining experience.

SERVQUAL Survey Questionnaire

The Servqual survey refers to the instruments of the Servqual model. The instrument consists of 22 perception items. The researchers utilize these instruments to evaluate consumers' thoughts and expectations regarding the quality of service. Therefore, it is also known as a servqual questionnaire for customer satisfaction. The authors of the Servqual model designed 22 perception items also 22 expectation items to set them into five dimensions of service quality. The Servqual model questionnaire assesses the gap score of the company that comes out ideally.

SERVQUAL Model Original Questionnaire

SERVQUAL Model Questionnaire 22 Items

SERVQUAL Questionnaire For Customer Satisfaction
Reliability Dimension

1. Gloant-Automobile fixes faults in cars as promised.
2. They are reliable in handling faults in cars.
3. They repair cars right the first time.
4. Their employees fix car faults at the promised time.
5. The charges for services are reasonable.

Assurance Dimension

6. The apprentices of Gloant-Automobile create confidence in customers.
7.  They display professionalism in handling faults in cars.
8. Their employees are always polite.
9. They have the knowledge to answer customers’ questions.

Tangibles Dimension

10. Gloant-Automobile makes use of modern equipment in repairing cars
11. They have enough parking space for their customers.
12. They provide an environment free from danger.
13. Their employees appear professional in their workplace.

Empathy Dimension

14. The apprentices of Gloant-Automobile give customers individual attention.
15. They deal with customers in a caring manner.
16. Their employees quickly apologize when they make mistakes.
17. Their employees try to understand customers’ needs.
18. Gloant-Automobile operating hours are convenient for customers.

Responsiveness Dimension

19. This company always informs customers when services will be performed.
20. They always serve customers promptly.
21. Gloant-Automobile is always willing to rectify car faults.
22. They are always ready to respond to customers.

Servqual Questionnaire Example With 22 Items
SERVQUAL Model Questionnaire- 22 Scales Items
Figure 2: SERVQUAL Model Questionnaire- 22 Scales Items
Conclusion

In conclusion, the Servqual model has become popular and accepted worldwide because of improving customer service quality. It is a multi-dimensional research system representing a customer satisfaction framework to satisfy customers. Many organizations use this model to achieve goals. The private organization follows the Servqual model to ensure quality services. The 5 Gaps in Service Quality are Knowledge Gap, Policy Gap, Communication Gap, Delivery Gap, and Customer Gap.

Citation For This Article (APA 7th Edition)
Kobiruzzaman, M. M. (2024). 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/