69 How can the value chain of the firm be useful for analyzing differentiation

69 how can the value chain of the firm be useful for

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69. How can the value chain of the firm be useful for analyzing differentiation?Answer: The value chain offers a break down of the different activities of a firm and their relationships. It allows one to not only analyze costs, but also to study the qualitative aspects of the activities and products at each stage of the chain. Because successful differentiation matches the firm’s capacity for creating differentiation to the attributes that are valued by customers, the value chain provides an extremely useful framework.Each stage can be dissected to understand the potential for decreasing costs, doing things differently, adding value, or generating new ideas for the entire process. Four steps are involved in the building of differentiation through the value chain: a/ construct a value chain forthe company and its customers, b/ identify for each activity the drivers of uniqueness, c/selectthe most promising variables for differentiation, looking at the linkages among activities, and the potential and ease for differentiation sustainability and d/ locate linkages between the value chain of the firm and that of the buyer, with the objective of creating additional value for the customer.70. Does differentiation imply segmentation?© 2013 Robert M. Grant12
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Answer: Differentiation provides customers with a product or a service whose characteristicsappear to be unique and are perceived by them as valuable. Differentiation is concerned with“how” a firm competes. Segmentation deals with “where” the firm competes in terms of targets(customer groups, localities, and product types). To implement differentiation, differenttechniques exist, but all techniques rely on a deep understanding of the identity, the needsand expectations, the location, the psychological and behavioral attributes of a firm’scustomers.Establishing a segmentation of the market and deciding a differentiation strategy areindependent in theory, because a firm may locate itself within a particular segment withoutachieving differentiation. However, the two concepts go hand-in-hand because thesegmentation step is a preparatory step in the differentiation decision, since it provides a toolto understand and classify customers’ characteristics, upon which differentiation is based.Moreover, by offering uniqueness in its products or services, a firm may inevitably targetcertain market niches.References: p248-24971. Does differentiation imply a focus strategy?Answer: Differentiation provides customers with a product or a service whose characteristicsappear unique and are perceived by them as valuable. A focus strategy is concerned withserving extremely well a segment of the entire market, for which a firm has a specificadvantage and the capabilities to be efficient and effective.
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