Differentiation Strategy


With the differentiation strategy, the unique attributes and characteristics of a firm’s product (other than the cost) provide value to customers. Because a differentiated product satisfies customers’ unique needs, firms following the differentiation strategy usually charge premium prices. To do this successfully, a firm must truly be unique at something or be perceived as unique. The ability to sell a good or service at a price that exceeds what was spent to create the product’s differentiated features allows the firm to outperform its rivals and earn above average returns.

 Rather than costs, the differentiation strategy’s focus is on continuously investing in and developing features that differentiate a good or service in ways that customers value. Overall, a firm using the differentiation strategy seeks to be different from its compititors along as many dimensions as possible. The less similarity between a firm’s goods or services and those of competitors, the more buffered the firm is from rival’s actions.

 A product can be differentiated in an almost endless number of ways. Unusual features, responsive customer service, rapid product innovations and technological leadership, perceived prestige and status, different tastes, and engineering design and performance are examples of approaches to differentiation. In fact, virtually anything a firm can do to create real or perceived value for customers is a basis for differentiation. The challenge is to identify features that create value for the customer.

 My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

Increasing Knowledge Intensity


Knowledge (information, intelligence, and expertise) is the basis of technology and application. In the 21st Century competitive landscape, knowledge is a critical organizational resource  and is increasingly a valuable source of competitive advantage. Because of this, many companies now strive to transmute the accumulated knowledge of individual employees into a corporate asset. Some argue that the value of intangible assets, including knowledge, is growing as a proportion of total shareholder value. The probability of achieving strategic competitiveness in the 21st Century competitive landscape is enhanced for the firm that realizes that its survival depends on the ability to capture intelligence, transform it into usable knowledge, and diffuse it rapidly throughout the company. Firms that accept this challenge shift their focus from merely obtaining the information to exploiting the information to gain a competitive advantage over rival firms.

 

Conditions in the 21st Century competitive landscape shows that firms must be able to adapt quickly to achieve strategic competitiveness and earn above average returns. The term strategic flexibility describes a firm’s ability to do this. Strategic flexibility is a set of capabilities firms use to respond to various demands and opportunities that are a part of dynamic and uncertain competitive environments. Firms should develop strategic flexibility in all areas of their operations. Such capabilities in terms of manufacturing allow firms to “switch gears—form, for example, rapid product development to low cost—relatively quickly and with minimum resources.

 

To achieve strategic flexibility, many firms have to develop organizational slack. Slack resources allow the firm some flexibility to respond to environmental changes. When the changes required are large, firms may have to undergo strategic reorientations. Such reorientations can drastically change a firm’s competitive strategy. Strategic reorientations are often the result of a firm’s poor performance. For example, when a firm earns negative returns, its stakeholders are likely to place pressure on the top executives to make major changes. To be strategically flexible on a continuing basis, a firm has to develop the capability to learn. The learning continuously provides the firm with new and current sets of skills. This allows the firm to adapt to its environment as it encounters changes.

 

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact www.asifjmir.com, Line of Sight