Differentiation Strategy Definition Pdf
Differentiation Strategy Overview Let's imagine that you're the owner of a small hunting store. With fall deer season fast approaching, you're getting prepared for the high demand for hunting supplies. Since hunters are always looking for the latest and greatest equipment, you realize that to compete with the large local box store, which also sells hunting supplies, you'll need to gain a competitive advantage. To do this, you need to offer something that attracts customers to your store; something that's so appealing that consumers are willing to pay higher prices just to own it. What you need is a differentiation strategy. Differentiation Strategy Defined So what is differentiation strategy?
Index Terms—cost leadership strategy, differentiation strategy, focus strategy, hospitality industry, Romania. The Use of Michael Porter’s Generic Strategies. Curious learners. Differentiated instruction is an approach that addresses student needs and preferences while also respecting the high demands of accountability in today’s world of standards and standardized testing. Differentiation embraces many of the processes, strategies, and approaches supported by best practice and research.
It's an approach that a business takes to develop a unique product or service that customers will find better than or in another way distinctive from products or services offered by competitors. Differentiation strategy is a way for a business to distinguish itself from the competition. If successful, it allows the business the opportunity to charge a premium for the good or service. Keep in mind, however, that the business often encounters higher costs to offer the unique product or service and thus, needs to be successful in attracting customers to cover that extra cost.
Successful Differentiation Strategy So, what must a business do to successfully implement a differentiation strategy? Businesses that are successful often have the following characteristics: First, they have access to the latest, cutting-edge scientific research. They also have personnel who are very skilled and have creative ideas, allowing them to develop products that meet consumers' wants and needs.
Broad Differentiation Strategy Definition
Additionally, companies that have successful differentiation strategies, typically have sales teams that can explain why their products are better than the competitors' products. And, finally, these companies generally have a reputation for creating innovative, high-quality products, which makes consumers more likely to conduct business with them.
Focused Differentiation Strategy Definition
Pros and Cons Like many other strategic business plans, differentiation strategy has both pros and cons. Let's start with the pros. First, if a company has a product that's wanted above those offered by the competition, it's able to charge more money.
Because there aren't any alternatives to the highly demanded product, the company can price the product or service higher. And when a company offers a superior product, it develops a strong identity as a company. This builds customer loyalty. As for the cons, it's typically not long before another company attempts to copy the product or service. When this happens, customers might turn to the competitor to purchase its products or services. Also, a company faces higher costs to develop a differentiation strategy. And, finally, while a company is trying to develop that one product that consumers want, those consumers might change their minds.
If this happens, the company might not be able to afford the higher cost of changing the product. An Example Let's apply what we have learned to an example. Taking the scenario from earlier, let's assume that you, as the owner of the hunting store, need to attract consumers away from the competition. First, you need to hire a team of individuals to develop a leading hunting product. They need to test the product and make sure it uses the latest scientific advancements.
Next comes the sales team. You need a group of employees to market and promote your product. They also need to be able to explain to consumers why your product is better than the big box store's products. Additionally, sales personnel must be able to emphasize why all the value-added benefits are more important and coveted then the lower cost options. Lastly, your company needs to build a strong brand to develop a strong reputation. This is often done by offering quality unique products that fulfill the criteria that consumers need and want. Lesson Summary Differentiation strategy is an approach that a business takes to develop a unique product or service that customers will find better than, or in another way distinctive from, products or services offered by competitors.
Those companies that are successfully implementing a differentiation strategy typically have sound scientific research, skilled and creative employees, a good sales team, and a strong reputation on their side. Some pros of differentiation strategy are the ability to charge more for products and development of consumer loyalty.
However, there are cons as well, including higher costs and the risk of being copied by a competitor.