The strategic choices of a product differentiator in terms of product differentiation, market segmentation and distinctive competency are:
1. Product Differentiation:
For achieving a competitive advantage, a differentiator chooses a high level of product differentiation to be achieved in terms of quality, innovation and customer responsiveness.
Innovation is very important for technologically complex products, where new features are the source of differentiation, and customers pay a premium price for new and innovative products, such as state-of-the –art computer, stereo, or car.
Market Segmentation:
A differentiator opts to segment its market into many niches and offers a product designed for each market niche and decides to be a broad differentiator, but might choose to serve just those niches where it has a specific differentiation advantage.
Distinctive Competencies:
In choosing distinctive competency to pursue, a differentiator concentrates on the organization function that provides the sources of its differentiation advantage. Differentiation on the basis of innovation and technological competency depends on the R&D function. Efforts to improve customer service depend on the quality of the sales function.
The success of strategy rests on the following conditions:
1. Product Differentiation:
For achieving a competitive advantage, a differentiator chooses a high level of product differentiation to be achieved in terms of quality, innovation and customer responsiveness.
Innovation is very important for technologically complex products, where new features are the source of differentiation, and customers pay a premium price for new and innovative products, such as state-of-the –art computer, stereo, or car.
When differentiation
is based on customer responsiveness, a differentiator provides comprehensive
after-sales service and product repair particularly in case
of cars and domestic appliances. Companies like Maytag,
Dell Computer, and Federal
Express all excel in customer responsiveness. The appeal a product makes to
customers’ psychological needs (such as prestige or status, patriotism, to
safety of home and family or value for money) can become a source of
differentiation. A differentiator strives to differentiate itself along as many
dimensions as possible. The more it differentiates from its rivals the more it
is protected from competition and the wider is its market appeal.
Market Segmentation:
A differentiator opts to segment its market into many niches and offers a product designed for each market niche and decides to be a broad differentiator, but might choose to serve just those niches where it has a specific differentiation advantage.
Distinctive Competencies:
In choosing distinctive competency to pursue, a differentiator concentrates on the organization function that provides the sources of its differentiation advantage. Differentiation on the basis of innovation and technological competency depends on the R&D function. Efforts to improve customer service depend on the quality of the sales function.
The success of strategy rests on the following conditions:
- The firms must identify the customer and his needs and values.
- The extent to which the organization understands the customer, user, or perhaps a stakeholder group value is often dangerously taken for granted by managers.
- It is much more difficult for a competitor to imitate a basis of differentiation connected to a mix of activities or features rather than just a product or service.
- The competitive advantage can be achieved on a static basis because in many markets customer values change, and therefore bases of differentiation need to change. However, even if customer values can be identified that are relatively constant, over time competitors can imitate bases of differentiation.
- Therefore, a business following a differentiation strategy may have to review continually bases of differentiation" and keep changing its strategy.
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