Differentiation Advantage

Differentiation Advantage - Differentiation Advantage...

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Differentiation Advantage Chapter 9
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Introduction A firm differentiates itself from its competitors “when it provides something unique that is valuable to buyers beyond simply offering a low price” Differentiation /D/ advantage occurs when a firm is able to obtain from its differentiation a price premium in the market that exceeds the cost of providing the differentiation
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Introduction Differentiation strategies are not about pursuing uniqueness for the sake of being different. Differentiation is about understanding the need that our product is serving and about understanding our customers
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Introduction The fundamental issues of differentiation are also the fundamental issues of business strategy: Who are our customers?How do we create value for them? And how do we do it more effectively and efficiently than anyone else
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Introduction Analyzing D. requires looking at both the firm (supply side and its customers (the demand side). On the supply side, the firm must be aware of the resources and capabilities through which it can create uniqueness (and do it better than competitors). On he demand side , the key is insight into customers and their needs and preferences
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Objectives Understand what differentiation is, recognize its different forms, and appreciate its potential for creating competitive advantage Analyze the sources of differentiation in terms of customers’ preferences and characteristics, and of the firm’s capacity for supplying differentiation.Formulate strategies that create differentiation advantage by linking the firm’s differentiation capability to customers’ demand for differentiation
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The Nature of Differentiation and Differentiation Advantage . Differentiation Variables The potential for differentiation a product or service is partly determined by its physical characteristics. For a product that is technically simple, or that satisfies uncomplicated needs, or that must meet specific technical standards, differentiation opportunities are constrained by technical and market factors.
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The Nature of Differentiation and Differentiation Advantage . Differentiation Variables Products that are complex, that satisfy complex needs, or that do not need to conform to stringent technical standards offer much greater scope for differentiation. D. extends beyond the physical characteristics of the product or service to encompass everything about the product or service that influences the value customers derive from it.
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The Nature of Differentiation and Differentiation Advantage. D. Variables Thus, the D. advantage of McDonald’s within the fast-food business depends not just on the characteristics of the food it serves or the associated services, but also the values it projects such as happiness, child development, family unity, and care for communities and the natural environment.
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Differentiation Variables Ultimately, D. is all about a firm’s responsiveness to customer requirement. Every action, no matter how small, and no
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Differentiation Advantage - Differentiation Advantage...

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