Chapter 1 explains what blue oceans are and how they are created. It begins with Cirque du Soleil as an example of a successful case of blue ocean creation. The company broke out of a red ocean by expanding the existing boundaries of the declining circus industry. At a time where alternate sources of live entertainment were on the rise and animal rights activists decried the mistreatment of circus animals, Cirque du Soleil created a blue ocean by merging traditional circus acts with theater. Unlike the traditional business model pursued by circus groups such as the Ringling Bros. and Barnum & Bailey, Cirque du Soleil’s model did not employ animals, did not fight to hire more renowned circus actors, and did not cater to children as their primary audience. By targeting adults, theatergoers, and corporate clients, they could sell tickets at a markup and keep their costs down while still capturing the traditional circus market. 

Red oceans are defined as industries whose boundaries and competitive rules are known and accepted. Companies caught in cutthroat competition in these spaces attempt to gather a greater share of the market by using traditional strategies, such as cost reduction, to outperform rivals.