In the words of noel branton, the impact of product differentiation on market structure depends on the ability of some firms to secure strong advantages over others in this field. Swot analysis, differentiation, competitive advantage. Advantages and disadvantages of differentiation open. They are available to any consumers as long as the items are online. In recent years the concept of competitive advantage has taken centre stage in discussions of business strategy. A read is counted each time someone views a publication summary such as the title, abstract, and list of authors, clicks on a figure, or views or downloads the fulltext. There could be small businesses or involved in a single business or a large, complex and diversified conglomerate with several different businesses. Kfc value chain analysis can be used in the competitive strategic decisionmaking process. Differentiation and its role in competitive advantage. Some brands are able to create competitive advantages through differentiation, even though their product or service alone is the same as, or possibly inferior to, the majority of the other options available in the marketplace. For that purpose, a differentiation strategy is chosen as the topic for the thesis. A market consists of individual customers who have unique product wants and needs.
In each extreme of the beach, there is an icecream post. Horizontal differentiation has similar products that vary in ways that are often superficial and do not impact price or quality. Pdf product differentiation, turbulence and sustainability. Differentiation looks to make a product more attractive by contrasting its unique qualities with. Advantages of lowcost strategies the appeal of the lowcost leadership strategy is based on the strong relationship that appears to exist between high market share, and high profitability. May 24, 2020 product differentiation or just differentiation is a marketing process of differentiating an offering product or service from others in the market, to make it more appealing to the target audience.
Pdf impact of product differentiation, marketing investments and. When utilized successfully, product differentiation creates a competitive advantage as customers view your product as superior. Product differentiation occurs on two clear levels. Kfcs sustainable competitive advantage lies in its adherence to the product and service differentiation and market recognition of specialization guide, 2006. The welfareenhancing benefit of product differentiation is the greater variety of products available to consumers, which comes at the cost of a higher average total. Below we illustrate a few examples in relation to an often differentiated productwomens handbags. Specifically, the brand loyalty that customers feel to a differentiated product makes it difficult for a new entrant to lure these customers to adopt its product.
However, choosing the right competitive strategy cost leadership, differentiation or focus requires knowledge of own and rivals cost structure. Therefore, small businesses frequently attempt to differentiate two or more sets of customers with unique needs which might be met with the companys products or services, from other. While having a quality product is good, being able to develop and articulate the qualities or. Product positioning differentiation global marketingschrage 15 158 competitive advantage achieved when there is a match between a firms distinctive competencies and the factors critical for success within its industry two ways to achieve competitive advantage lowcost strategy product differentiation.
A differentiation strategy involves the firm creating a productservice, which is considered unique in some aspect that the customer values because the customers needs are. Kfc is a leader in the industrys contribution to the professionalism of management, innovation with cutting edge process of preparing food effectively and efficiently. But combinations like cost leadership with product differentiation are hard but not impossible to implement due to the potential for conflict between cost. Mar 09, 2015 porter distinguished between two types of strategies. Apr 18, 2018 advantages and disadvantages of product differentiation. May 22, 20 the differentiation strategy is where a company decides to choose a certain attribute of the product to focus on. Product differentiation means that your product has one or more distinct attributes that separate it from competitors. Product differentiation, petroleum, effimax, profitability, industry. The advantages of a product differentiation strategy small. The differentiation can be about colors, packaging, shapes, flavors, etc. A new soda brand, for example, would struggle to take customers away. The potential for differentiating a product or service is partly determined by its physical characteristics. Pdf on feb 1, 1982, richard schmalensee and others published product differentiation advantages of pioneering brands find, read and cite all the research you need on researchgate.
Product differentiation, turbulence and sustainability of competitive advantage. Horizontal differentiation is when products are differentiated according to a specific feature. This study therefore sought to determine the role of product differentiation strategy in new kenya corporative creameries for competitive advantage. Pdf prior research explores the individual impact of brand equity and new product development on firms marketing performance. Product differentiation examples of horizontal product differentiation. It involves defining the offerings unique position in the market by explaining the unique benefit it provides to the target group. The advantages of differentiated marketing bizfluent. Horizontal differentiation has similar products that vary in ways that are often. Differentiated marketing meets specific customer needs, rather than attempting to cover all bases. Determinants and consequences of product differentiation strategy. Sep 19, 2019 product differentiation is a marketing process that showcases the differences between products. Jan 19, 2016 beyond existing competitors, a differentiation strategy also creates benefits relative to potential new entrants. Although some few studies have been done on the relationship between product differentiation strategies for competitive advantage, information on the strategies used in kenya is ostensibly missing in the literature.
Offering the same software product in two versions for professional users and for home users enables the supplier to meet the price and performance needs of each sector with only minor modifications to the core product. With product differentiation at never get old company, buyers not only buy jeans. Product differentiation advantages of pioneering brands by. Product differentiation, competitive advantage, organizational performance. Its tv advertisement has focused on the fact its alkaline battery is the one that lasts the longest, which means it costs more than its competitors. Ibidunni department of business management, covenant university, ota, nigeria abstract in recent years the concept of competitive advantage has taken centre stage in discussions of business strategy.
Although the two posts sell exactly the same icecreams, consumers are not indifferent between. This may be the result of heavy advertising and other forms of sales promotion. Pdf on jan 1, 2014, john mcgee and others published differentiation strategies find, read and cite all the research you need on researchgate. Firms do not advertise, and buyers are rational but. This involves detailing the characteristics that are valued by customers that make it unique. Corporate social responsibility, product differentiation. Product differentiation is the process of distinguishing a product or service from others. Thanks to ecommerce, goods and services have become more mobile and digitalized. Cost leadership strategy, product differentiation strategy, financial leverage, performance introduction the purpose of joint stock companies and their managers is.
Studying the phenomenon of competitive advantage and. Product differentiation, turbulence and sustainability of competitive advantage catherine matraves and laura rondi 15th march 2005 abstract building on the new theory of industrial concentration, we analyze the relation between market size and product differentiation, and show precisely how product differentiation impacts the. A tool of competitive advantage and optimal organizational performance a study of unilever nigeria plc joy i. A strategic perspective on product differentiation richard makadok. It allows the seller to contrast its own product with competing products in the market and emphasize the unique aspects that make. Product differentiation definition, types, importance. While having a quality product is good, being able to develop and articulate the qualities or features that clearly make one product better. The corporate strategy in these cases is about the basic direction of the firm as a whole. For products that are technically simple a pair of socks, a. Product differentiation being the most commonly used one of these two strategic typologies spencer, joiner, and salmon, 2009. Firms do not advertise, and buyers are rational but unable to judge the quality of. Multigroup analysis further revealed that the positive and significant effect of csr product differentiation on export performance is likely to be contingent on the number and type developing vs. Jan 14, 2017 the pros and cons of product development show that this process can be risky, but it also provides a brand and business with the opportunity to experience greater success. When approached in a methodical way, the innovative outcomes are often worth the risk of future failure.
Product differentiation and economic progress mises institute. Product differentiation costs and global competition. Product characteristics in terms of product characteristics, duracell might well be one of the best known examples of differentiation in our country. Vertical differentiation refers to products that fall on a scale from best to worst, highest to lowest, impacting the overall functionality of the item. For small businesses, a product differentiation strategy may provide a competitive advantage in a market dominated by larger companies. Nov 20, 2018 product differentiation is essential in todays financial climate.
Find materials for this course in the pages linked along the left. A strategic perspective on product differentiation. Product differentiation is economically advantageous to a company. Product differentiation is important in todays financial climate.
The advantages of differentiated marketing your business. Choose of one puts constraints on using the second. Pdf product differentiation advantages of pioneering brands. The methods of achieving differentiation can vary broadly across industries, products and services. Product differentiation advantages of pioneering brands by richard schmalensee abstract a model is presented in which first entrants obtain demand advantages that can be used, if scale economies are present, to deter any later entry. Product differentiation is a competitive business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their products. Pdf on feb 1, 1982, richard schmalensee published product differentiation advantages of pioneering brands find, read and cite all the. A differentiation strategy offers important advantages and disadvantages for firms that adopt it.