The term “red ocean” describes a market environment saturated with competitors offering similar products or services. In such an environment, competition for customers becomes intense, often resulting in price wars, which inevitably leads to reduced profits and makes survival difficult, especially for small and medium enterprises (SMEs). In Nepal, this situation is exacerbated by the tendency for businesses to concentrate in established and seemingly profitable sectors such as tourism, retail, and agriculture.1This leads to further market saturation and increased competitive pressure.

One of the major challenges for Nepalese SMEs in this “red ocean” is the rapid imitation of their successful ideas by larger, resource-rich players. Once a small business identifies a promising direction or offers an innovative product, larger companies can quickly replicate the idea, robbing the SME of its initial advantage and making it difficult to get a fair return on its investment. This challenge creates significant barriers to innovation, as SMEs may be wary of investing in new ideas unless they see ways to protect their unique offerings. Thus, the “red ocean” in Nepal is characterized not only by multiple competitors, but also by the high vulnerability of SME innovations to rapid imitation. This makes developing sustainable, hard-to-copy differentiation strategies not just desirable, but critical to survival and prosperity.