RED OCEAN STRATEGY

Red Ocean Strategy

Red Ocean Strategy

External Environment Analysis: PEST

Red oceans represent markets where incumbents' Red Ocean Strategies (ROS) are fairly similar and rivals are battling over a shrinking profit pool. Red oceans are new markets. The focus is on rivals within an industry, competitive position within a strategic group; better serving the buyer group, maximizing the value of product or service offerings within the bounds of its industry, and adapting to external trends as they occur. In a Red Ocean market, everyone is just talking a different version of the same thing to the same group of people.

It's dramatically clear that, at least in this instance, when you can catch a red ocean competitor in the act of competing with its red ocean counterpart the difference in earnings productivity can be quite significant. The Red Ocean represents all industries in existence today - The known Market Place, where competitive rules of the game are well understood and where companies try to outperform their rivals in order to obtain a greater share of the existing demand. A very crowded Ocean full of sharks! The Red Ocean is the unknown market place, untainted by competition. In this Ocean demand is created instead of fought over. (Levitt 2005)

Through application of the Six Rules of Demes, your Red Ocean Strategy could transform your mixed product hospitality development and create a new market where there is ample opportunity for growth, which is both profitable and rapid. Joop Demes, leading hospitality consultant in Africa and the Indian Ocean is the visionary of the industry in this region, His rules are very simple: location, accountable operator, total control of the development, facilities and activities under control or with preference access to project members, reputable exchange company and finally - use of industry specialist companies to design the project. The cognitive balance will be increased by offering a leap in value and pricing, rapidly earning the project a buzz and a loyal following in the market place. Red and red oceans have always co-existed and always will. Practical reality demands that companies understand the strategic logic of both in order to make the wise choice.

Internal Environment Analysis: VALUE CHAIN

The first strategy formulation principle involves the reconstruction of market boundaries, and aims to reduce market search risk. This principle asks managers to identify new markets by looking across alternative industries, strategic groups within industries, the chain of buyers, complementary product or service offerings, functional or emotional appeal to buyers, or time.

The second formulation principle involves a focus on the big picture, not the numbers. It aims to reduce planning risk. This principle asks managers to engage in visual awakening, exploration, strategy fairs, and communication using a number of BOS tools. (Levitt 2005)

The third formulation principle involves reaching beyond existing demand, and aims to reduce risk arising from markets that are otherwise simply too small. This principle asks managers to migrate beyond the existing traditional customer base to include the much larger population of ...