Navigating through red and blue oceans

In the year 2000, the USA’s wine industry had the largest aggregate consumption of wine in the world but was overcrowded by national wineries that were competing with other imported labels, in other words, they were navigating across a ‘Red Ocean’.

The term ‘Red Ocean’ is used to describe known markets where companies fight head to head by focusing on already existing customers.

In contrast with these overly populated markets there are ‘Blue Oceans’, uncontested market spaces with a whole new set of consumers and where the rules of value and cost trade-off do not apply.

Blue Ocean strategies are not about fighting competitors off, they’re about making them irrelevant.

They can be carried out by asking ourselves “which factors should be raised, reduced, eliminated or created within the industry?” as well as to looking across alternative markets.

In 2001, the Australian company Castella Wines had a vision, “to create an approachable wine that everyone could enjoy” and came up with a simple two bottle selection of drinks called [yellow tail].

The idea quickly took over the USA’s wine industry and the Castella wines became one of the top five most powerful wine companies in the world in less than 10 years.

They had found a Blue Ocean by turning a complex snobby beverage into a fun and easy drink.

By eliminating expensive ageing processes that were not appreciated by the average customer, they were able to achieve differentiation and low-cost simultaneously

This is known as value innovation and it is the key to conquering a blue ocean.