This study aims to explore and analyze the components and categories of enhancing innovation capacity through the application of the blue ocean strategy in the Iraqi pharmaceutical industry. Conducted as an applied research project, it employs a qualitative approach using thematic analysis. Data were gathered through semi-structured interviews with 19 managers and experts in marketing and the pharmaceutical sector, analyzed across three coding phases: open, axial, and selective. During the open coding phase, 77 initial codes were identified and grouped into 12 axial categories: red ocean challenges, the necessity to move beyond traditional competition, advantages of the blue ocean strategy, elimination of unnecessary factors, reduction of low-value factors, enhancement of existing factors, creation of new factors, expansion of innovation capacity, integration of emerging technologies, sustainability and long-term impacts, and strategic foresight. These categories were subsequently consolidated into four overarching themes: challenges, tools, applications, and outcomes. The findings reveal that competitive challenges characteristic of red ocean environments, such as intense traditional rivalry and innovation limitations, can be effectively addressed through the four-pronged framework of elimination, reduction, enhancement, and creation. By fostering new markets and incorporating advanced technologies, the blue ocean strategy enhances innovation capacity and economic sustainability, promotes transformative innovation, and establishes a enduring competitive edge.