1. Although cost leadership is, perhaps, less relevant for firms pursuing product differentiation, costs are not totally irrelevant. What advice about costs would you give a firm pursuing a product differentiation strategy?
2. Product features are often the focus of product differentiation efforts. Yet product features are among the easiest-to-imitate bases of product differentiation and thus among the least likely bases of product differentiation to be a source of sustained competitive advantage. Does this seem paradoxical to you? If no, why not? If yes, how can you resolve this paradox?
3. What are the strengths and weaknesses of using regression analysis and hedonic prices to describe the bases of product differentiation?
4. “Monopolistic competition” is the term that Chamberlin developed to describe firms pursuing a product differentiation strategy in a competitive industry. However, it is usually the case that firms that operate in monopolies are less efficient and less competitive than firms that operate in more competitive settings. Does this same problem exist for firms operating in a “monopolistic competition” context? Why or why not?
5. Implementing a product differentiation strategy seems to require just the right mix of control and creativity. How do you know if a firm has the right mix? Is it possible to evaluate this mix before problems associated with being out of balance manifest themselves? If yes, how? If no, why not?
6. A firm with a highly differentiated product can increase the volume of its sales. Increased sales volumes can enable a firm to reduce its costs. High volumes with low costs can lead a firm to have very high profits, some of which the firm can use to invest in further differentiating its products. What advice would you give a firm whose competition is enjoying this product differentiation and cost leadership advantage?
This question was asked on Feb 26, 2012.
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