Differentiation
The second generic strategy according to Porter is one of differentiating the product or service offering of a firm. When pursuing a differentiation strategy, a firm focuses effort on creating unique service or product, setting it apart from competitors on an industry wide basis. This uniqueness has to appeal to buyers and be perceived as valuable. In that sense, the strategy involves tailoring the product according to the customer’s needs, be it image and reputation (e.g. Porsche), product quality (e.g. Mercedes-Benz), reliability (e.g. Bosch), design features (e.g. Apple) or customer service (Dean and Evans, 1994; Sashi and Stern, 19950. These value perceptions are created by attributing qualitative differences to the products
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On the one hand, the pursuit of such strategy eliminates the risk of taking part in price competition since differentiators are not forced to maintain low costs and are instead able to achieve a higher price for their products by targeting customers who are less price-sensitive. What is more, the strategy creates brand and customer loyalty (Porter, 1980), which together with the fact that a competitor would need to master or surpass the uniqueness of the product or service provides substantial barriers to entry. Differentiators are also in the position to suppress buyer power since the differentiated products are hard to imitate (Miller, 1992) Moreover, since there are usually no comparable alternatives the firm and its products are better protected from potential substitutes. Finally, the higher margins allow the differentiator to survive the pressure from powerful suppliers. (Acquaah and Yasai-Ardekani, …show more content…
This is due to the fact that apart from the noted functional differences, Porter’s generic strategies also require different resources, skills, organizational arrangements, control procedures and critical tactics, which usually have reverse effects. The generic strategies also imply specific leadership styles and can carve differing corporate cultures and as a result shape the human resource of a firm in diverse ways. Hence, prolonged commitment to one of the strategies as an ultimate goal is vital for the survival and success of a firm (Porter,
The strategy for competing in the market was a broad-differentiation strategy. It was broad because it produced a large variety of products such as clamps, inserts, knobs, and similar items. Also, it differentiates from the other metal companies because of its good quality, good delivery, and reasonable price.
In Porter’s model, this generic strategy involves minimizing costs to offer products at low prices (Steven J. Skinner, 1994). As a low-cost provider, Lucas Papaw Ointment’s offers products that are relatively cheaper compared to competitors like Suvana Paw Paw. However, the company also uses broad differentiation as a secondary or supporting generic strategy. This secondary generic strategy involves developing the business and its products to make them distinct from competitors. For example, making nature product with selling lower price, Lucas’s Papaw Ointment applies the broad differentiation generic
A strategy in which company offers relatively lower prices to increase the demand of their product and to increase the market share of their product. In this strategy was implemented to gain the competitive advantage over the peer companies. This also helps to increase the economies of scale by increasing the production volume of the product, whereas differentiation strategy is some strategy where the companies produces the unique and quality products to increase its market share value which gives competitive advantage to the company when compared to other companies. Both the strategies are really important to a company as a quality product with less price will create boom in the market share for that particular company. 2.
...re the price-setters, and companies cannot risk increasing their prices significantly as it may result in a loss in the customer base. In fact, in order to remain competitive, prices of products and services should always be kept either equal or lower than that of the rivals. Either that, or the company provides a strong value-added component that the customers wouldn’t mind paying a premium price for.
In the 1980’s Michael Porter developed a framework for analyzing an industry and suggesting ways that a firm can enhance its competitive advantage. Currently this model is arguably the most preferred model advocated by various scholars and management gurus. As a result, most strategic and other high profile managers have adopted. In 1994, Kanter developed another Model referred to as collaborative advantage model that to an important extant has also become influential as Porter framework of competitive advantage. Since the two models were advocated by various credible persons and they were considered to be very effective in their own ways, most managers opted to subscribe to either of the two. Burton (1999) however discovered organization that adopted in extreme either of the two model was less likely to achieve optimal effectiveness and success. The situation was further worsened by the globalization of the business environment (Burton 1995; Ricket & Mudambi 1998).
The benefits and limitation of these factors was mentioned in previous assignment. Furthermore, we use porter’s analysis to analyse the micro environmental factors of the organisation like competitive rivalry, bargaining power of the buyer, bargaining power of the supplier, threats of new entrant and threats of new substitutes available in the market against the organisation. We all discussed in the previous assignment. Every business need to have a strategy to expand or to achieve their desire goals. Business level strategy is a mixture of commitments and actions to provide values to customers by using core competencies in specific product or in a specific market (Frank T. 2013). In this essay, it tells about the business level strategy in organisation and it also tells about the benefits and limitations of the business level strategy. It also tells about the different factors for successful implementation in Vodafone company to achieve
Magretta, J. (2012). Understanding Michael Porter: The Essential Guide to Competition and Strategy. Harvard Business Press. Retrieved from http://common.books24x7.com.ezp-01.lirn.net/toc.aspx?bookid=45565
Tanwar, Ritika. (Nov. - Dec. 2013). Porter’s Generic Competitive Strategies. IOSR Journal of Business and Management, Volume 15, Issue 1, pp 11-17. Retrieved 1 May 2014 from http://iosrjournals.org/iosr-jbm/papers/Vol15-issue1/B01511117.pdf?id=7380
One of the most important marketing strategy is differentiation strategy. It is necessary to differentiate the brand as there are more competitors in the market which makes the product identification difficult. Thus all top companies use differentiation strategies.
Both Porter and Miles and Snow’s strategy typologies are based on the concept of strategic equifinality, or the ability for firms to be successful via differing managerial strategies (Hambrick, 2003, p. 116). Porter 's strategy is more generic while Miles and Snow’s is more specific in nature. Porter’s generic strategy typology is based on economic factors centering on the source of a firm’s competitive advantage and the scope of a firm’s target market (González-Benito & Suárez-González, 2010). Porter’s typology emphasizes a firm’s cost, product differentiation or non-differentiation and market focus. When utilizing Porter’s strategy typology, a firm must first decide to target its products toward the mass market versus a market niche or focus. Secondly, a firm will determine if it wishes to minimize costs or differentiate its products with differentiation meaning that firms will most likely forego lower costs (Parnell, 2014, p. 184). This can lead a firm to develop a myriad of strategies between these options. Strategies which may have or not have focus, may or not be differentiated, may or not be low cost or any combination of strategies. In contrast to Porter, Miles and Snow’s typology is more specific in nature.
In the modern world of conducting business, any company that wishes to succeed must differentiate its products or services from others in the industry. Differentiation makes it possible for consumers to point out notable differences between one company’s products as compared to those of competitors. Differentiation helps companies build brand loyalty as the uniqueness keeps customers fixed on a particular product. BMW is one of the most popular automakers in the world today. It definitely uses differentiation as a strategy to beat off competition by building products that are innovative, detailed and incomparable to those of competitors.
Aside from low-cost strategy, describe other methods that businesses can use to differentiate their products.
If consumers think that the company’s product or service provides greater value compared with competitors, the company can charge a higher price. Otherwise the firm must either charge a lower price or change customers’ perceptions to justify a higher price. The goal is not to match or beat competitors’ price, but is to set prices according to the relative value created versus competitors. For example, Apple makes high-quality consumer electronics: it leads its industry despite charging higher prices than competitors such as Samsung, Huawei, Lenovo and Dell. Indeed, despite Apple’s premium prices, customers believe that Apple give them a lot more value for the price they pay. (Armstrong 2017,
Product differentiation – Even though consumers are getting more and more aware about differentiated products but still i...
Like differentiation, positioning depends on a customer’s understanding of a brand or product relative to competing products within the market. The difference between differentiation and positioning is that in differentiation the brand is set apart from competing brands, but in positioning the brand is juxtaposed relative to similar brands and products. Both concepts require a value judgement of the brand within the market. (Kotler & Armstrong, 2012). The key importance of both positioning and differentiation for a marketing strategy is establishing the value of a product in the minds of a consumer relative to other products. When a customer knows how well a product stacks up against the competition, she has more of a reason to choose it over the