Differentiation As A Competitive Strategy Marketing (Term Paper Sample)

DIFFERENTIATION AS A COMPETITIVE STRATEGY
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Introduction.
Organizations employ different strategies to outsmart their rivals in the competitive business environment. The strategies employed must be smart, robust and attain a competitive advantage for the organization. According to Michael Porter and the generic competitive strategies, the relative position of an organization within its industry determines whether its profitability is below or above the industry average (Tanwar 2013). The primary fundamental basis of profitability above average in the long term is sustainable competitive advantage.
According to Tanwar (2013) in the article “Porter’s generic competitive strategies,” the two primary types of competitive advantage that can be possessed by an organization: differentiation or low cost. The two primary competitive advantage types combined with the scope of processes or activities for which an organization seeks to achieve them, contribute to three generic strategies for excellent performance in an industry: differentiation, focus, and cost leadership (Tanwar 2013). In cost leadership, an organization should set out to become the low cost manufacturer or producer in the industry.
Some of the varied sources of cost leadership include preferential access to raw materials, proprietary technology, the pursuit of economies of scale, and other factors (Animesh, Viswanathan, and Agarwal 2011). Secondly, focus generic strategy rests on the opportunity or choice of a very small and narrow competitive scope within a market or industry (Tanwar: 15). Focusers select a group or segment in the mentioned industry and tailors its business strategies to serve them to the exclusion of other groups or segments.
Differentiation strategy
According to Porter’s generic competitive strategies, differentiation strategy is employed by business organizations to increase and improve the perceived industry value of their products or brands as a way of enticing buyers to choose their brands, products and services over substitute offered by companies in the same industry, and are their competitors (Animesh, Viswanathan, and Agarwal 2011). A differentiation strategy calls for the organization to develop its products and services in a way that they offer unique features and attributes valued by the customers.
The customers should perceive these products and services to offer better value than others from industry competition. The value added by the product or service uniqueness may allow the organization to charge premium prices for the goods and services (Animesh, Viswanathan, and Agarwal 2011). The organization in most cases hope that the higher prices charged because of the extra value addition will cover the extra production costs incurred in making the product or service outstanding and unique (Animesh, Viswanathan, and Agarwal 2011). Because of the unique attributes and features of the product, if suppliers increase their prices the organization is able to pass along the costs to the customers who would be unable to easily find substitute products.
The focus of differentiation strategy is creation of products and services that stand out in the market, hence providing a competitive edge for the organization (Banker, Mashruwala, and Tripathy 2014). On what foundations are implementation of differentiation strategy based? The foundations of the implementation of differentiation strategy are the levels of products and services, the level and degree of competition in the industry, and the changing customer needs with the constantly changing business environments.
Achieving and implementing differentiation strategy as a competitive advantage.
Organizations can implement and carry out differentiation strategy using different techniques or methods. Through implementation of the differentiation strategy, the users’ brand loyalty is successfully cultivated and the corporation avoids the risks associated with directly confronting their competitors. The most common type or form of differentiation is product differentiation strategy (Valipour, Birjandi, and Honarbakhsh: 144). Other than product differentiation, which is basically the idea behind differentiation, organizations have implemented in other competitive strategies such as differential service strategy, differential personal strategy, differential image strategy, and differential marketing channel strategy.
In service differentiation strategy, in the face of strong competition, organizations can put a lot of focus and attention to the service content, the service image and the service channels. Through this route, the organization builds up its own service features which are different from what its competitors are able to offer (Valipour, Birjandi, and Honarbakhsh 2012). This way, the organization achieves competitive advantage in the industry market. The purpose of service differentiation strategy is to highlight the own advantages of the organization, which makes it distinct from the competition (Valipour, Birjandi, and Honarbakhsh 2012). Differentiated services include effectiveness in delivery, consulting services, customer training, installation, and several other factors.
On the other hand, personnel differentiation implies that the organization obtains competitive advantage through hiring the best and talented employees, and then training these people better than their competitors. The characteristic or image of the employees or workplace of the organization is to have excellent and quality-ability team of employees (Valipour, Birjandi, and Honarbakhsh 2012). When employees are effectively trained, motivated and compensated, they stand out. Their standing out is seen in the following components: effective communication skills, responsibility, reliance, credibility, courtesy, and better competence.
Organizations with these type or breed of employees improve the competitive advantage of the organization through operational efficiency, reducing wastages and errors, and improving performance (Valipour, Birjandi, and Honarbakhsh 2012). An organization can also build a differentiation strategy through its image and reputation. The image of the organization covers to the public’s feelings and views about the products given out, and the organization on its own.
Through media campaigns and promotions, the organization can form quality and great reputation and image in the heart of its customers. This is to imply, the unique and excellent image of the corporation improves and creates the loyalty of the customer to the product of the organization. Different factors can shape the image and reputation of the organization: corporate social responsibility activities, the slogan, friendly marketing practices, and improved stakeholder relationships (Valipour, Birjandi, and Honarbakhsh 2012). Common ways through which product differentiation is achieved may take the following: horizontal differentiation, vertical differentiation, continuous improvement strategy, and circular differentiation.
In horizontal differentiation, similar products are placed together and then marketed according to quality and price. Usually, it falls on the consumer as a way of inferring higher prices as an indication of top and improved quality (Sun, and Pan 2011). Factors such as reliability, expiration dates, life expectancy, and the production costs can be presented in ways that are likely to appeal to the clients. Vertical differentiation is furthered by the theory that products are not positioned or given ranks using the better versus-worse scale. However, the appeal to personal preferences of the customers are used instead. For instance, marketing chocolate ice cream as objectively better that vanilla ice cream would be an impossible task.
The marketing strategies used must have the personal preferences of the customer in mind and appeal to the demographics without the status of other products with the same qualities and on a similar vertical place being diminished (Sun, and Pan 2011). Continuous improvement strategy can be achieved by reaching the target audience and customers directly, through criticism and input (Sun, and Pan 2011). Through this platform, consumers are directly involved in creation of better products and services, and more efficient and hence the relationship between the manufacturer and consumer are strengthened.
Differentiation strategy in new markets, re-segmented markets and existing markets.
In a new market, differentiation strategy, especially when looking at product differentiation is less effective and broader, as the existence of the market has not been established neither does competition exist. Instead of differentiating, it is more effective in new markets to focus on the positioning of the product on the overall problems of the customer and the unique value offered by the strategy or solution (Sun, and Pan 2011). Organizations must understand that in such environments, customers may not yet have the background knowledge of comprehending the differentiating value of the singular features of the innovation.
Organizations who are redefining the existing market either enter niche or low-end markets must shape their product differentiation strategy and positioning strategy for a blend of both of new and existing markets (Sun, and Pan 2011). When organizations are competing in newly created markets, especially the newly segmented ones, the type of product offered are likely to be familiar to the customers and hence the background knowledge may exist for the customers to understand the idea behind product differentiation (Sun, and Pan 2011). Organizations which compete in existing markets must identify ways in which they are positioned in the industry, and especially when the competition is intense and stron...