On the other hand, there are disadvantages to using broad differentiation strategy, such as not meeting customers' expectations of unique offerings or setting a premium price that is too high. Product differentiation occurs on two clear levels: vertical and horizontal. Differentiation strategy 1. They are well-positioned in the market with a plentiful amount of easy to access stores. Competitive Strategy is about applying offensive or alternatively defensive actions to create a advantageous position within marketplace, with a purpose to deal with issues effectively with competitive forces in addition to come up with a much better return on investment.. As a product remains in the market for longer consumers become smarter about the prices and thus the premium charges being charged can no longer be sustained. Based on this information. Cost Leader. The Coca Cola Company has been using a broad differentiation strategy to compete in the American soft drink industry for the last decades. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). All of the six strategies designed by porter enlists the interaction between pr… Additionally, a differentiation strategy relies on effective and productive human resources. The big risk when using a differentiation strategy is that customers will not be willing to pay extra to obtain the unique features that a firm is trying to build its strategy around. The Coca Cola Company has been using a broad differentiation strategy to compete in the American soft drink industry for the last decades. In this post I’m going to be focusing on differentiation, but it is important to understand why differentiation is a strategy and how it relates to competitive advantage. Diversification is a form of corporate strategy designed to improve opportunities for growth and profitability. b) Provide a summary of potential opportunities and threats to the Coca Cola Company as the current CEO will use your analysis to develop a new strategic management process for the company’s operations in the US. As editors of the Wiley Encyclopedia of Management 3e, Vol. Required fields are marked *. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. Advantages and disadvantages of Coca cola joint ventures for diversification. Examples of Firms Pursuing a Differentiation Strategy ... strategy means that a firm is competing based on uniqueness rather than price and is seeking to attract a broad market (Porter, 1980). Competitive Advantage cannot be fully understood by considering an organisation in general. The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. NRS 451VN Week 1 Assignment: Professional Resume and Cover Letter, NR510 Week 1: Barriers to Practice Discussion, Economic Growth and Education Level in China. Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. Differentiation strategies have … The different factors on which the process is implemented include: Cost declines with cumulative volume are by no means automatic, nor is reaping all available economies of scale achievable without significant attention. The Disadvantages of Differentiated Marketing. Q3. Differentiation is the educational practice of modifying or adapting instruction, school materials, subject content, class projects, and assessment methods to better meet the needs of diverse learners. As mentioned above, Porter suggested either of the three strategies to survive in a competitive business. Starbucks has made the organization well-known for tailoring to broad customers’ needs by preparing orders to meet customers’ wishes, no matter how detailed they are. There could be small businesses or involved in a single business or a large, complex and diversified conglomerate with several different businesses. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). Large companies strive to differentiate their cereal brand as a higher quality than cheaper cereals. Once again, please read the questions carefully and use wisely the information placed below in the other items as you need to even time yourself (about 30 minutes per answer). Broad differentiation strategy for many companies often relies on strengths. Starbucks target market is large enough to offer continued growth potential and attractive profits. differentiation strategy A business strategy in which a company tries to gain a competitive advantage by providing a unique product or service, or providing a unique brand of customer service. Figure 5.10 image description: Executing a Differentiation Strategy. Most famously, Starbucks offers all part-time employees that work at least twenty hours health insurance benefits, a benefit implemented by CEO Howard Schultz who watched his father struggle as an employee of companies that did not offer such benefits. Losing the perceived customer quality differentiation is devastating to this strategy. Each generic strategy offers advantages that firms can potentially leverage to enjoy strong performance, as well as disadvantages that may damage their performance. Other firms may out differentiate the existing firms by introducing better unique products into the market. Why is cost leadership potentially so important? Training programs must be comprehensive to support the customer service differentiation but can be expensive. Q1. The traditional method to achieve this objective is to produce on a large scale which enables the business to exploit economies of scale. Q1. Product differentiation means that your product has one or more distinct attributes that separate it from competitors. This strategy is concentrated on a broader segment of the total market. 1. Corporate level strategy implies the notion of creating value by deciding in which businesses a company may compete. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. Pursuing a differentiation strategy requires a larger financial investment from the company, another weakness. A broad differentiation strategy: Trying to differentiate different ways of delivering company products from competitors that will appeal to a wider range of customers [Some examples are Nordstrom (known for customer service policies and staff) and Whole Foods (emphasis on health foods and organic groceries) There are several ways an organization can create a differentiation-based competitive advantage for a single product or the company as a whole. Please do the following, a) Discuss the advantages and disadvantages of all these different means to achieve diversification. Sara Lee’s Cookie Crumbles – 2 Business Units Survive, Starbucks – Pursues a Broad Differentiation Strategy. Starbucks offers their partners the opportunity to purchase company stock through payroll deductions. This will help the company to survive and minimize the risk, but if the company does not choose one of three competitive strategies, then there would be a loss of resources. a) Please provide a very detailed analysis of the Coca Cola company’s resources and capabilities. In 2007, department store Dillard’s stopped carrying men’s sportswear made by Nautica because the seafaring theme of Nautica’s brand had lost much of its cache among many men. They accommodate what their buyers view as valuable and are able to create demand at a profitable price. Focused cost leadership is the first of two focus strategies. The differentiation strategy is closel Q4. One weakness of using a differentiation strategy involves the challenge of changing the customer perception. There are essentially two factors that identify competitive strategies. I feel that you do not need more than this company information and your reading from the book to properly answer the questions. The idea here is simple. A differentiation strategy offers important advantages and disadvantages for firms that adopt it. Posted October 11th, 2020. One of the main criticisms to the Resource Based View of the Firm is that companies cannot obtain sustainable competitive advantages because of competitor’s reactions and attacks that erode advantages depending on the market cycle [slow or fast] that the company is competing. This strategy is concentrated on a broader segment of the total market. Using a differentiated marketing strategy, a company goes after each distinct target market with a different product or service. Continued innovation and quality improvement a… Perhaps Starbucks most impactful strategy is the time, effort, and financial resources that are invested into its employees – or partners as Starbucks has eliminated the word employees from its vocabulary. Advantages and disadvantages of Coca cola joint ventures for diversification. Some of thes… 2. broad across-the-board: broad in scope or content; "across-the-board pay increases"; "an all-embracing definition";… Product differentiation is economically advantageous to a company. 3. advantages and disadvantages of differentiation strategy pdf. Cost leadership styles focus on resource organization. I am providing the latest information from the Coca Cola Co. Tougher Work Load for Teachers Working with each individual according to his learning style means more work for the teacher, more time taken for each lesson and each child. Difficulty in the pricing of goods that are not new into the market. Differentiation Strategy Prof. (Dr.) Nitin Zaware Prof. (Dr.) Nitin Zaware 1 2. Types of Strategies – Cost Leadership ,Differentiation , Focus. Once determined, the strategy is categorized as one of the 5 Generic Competitive Strategies. Copyright © 2021 A+ Professional Essay Writing Services:- All rights reserved. Despite the stagnant growth in the industry, its leading brand, Coke, remains the market leader and it can be considere8i9d as a cash cow for the company. Advantages Of Product Differentiation. The company must use only one out of three competitive strategies. Below are the disadvantages or risks of the broad differentiation strategy: Differentiating on an unimportant product feature that doesn't result in providing the best value to the customer; Too much differentiating the product like products' features exceed the customers’ needs; 1. Your email address will not be published. Starbucks serves a market that is defined by coffee drinkers. Q2. Then, by achieving the lowest possible cost, the leader can place their team or organization into a position where the lowest price in the market is charged for needed goods or services. To successfully employ this strategy, Starbucks provides differentiated quality and service in the coffee sales and shop industry while diversifying their offerings to include: a variety of coffee product sales outside their stores through partnership with PepsiCo, Starbucks brand liqueur through partnership with Jim Beam, food and merchandise sales, and other acquisitions such as Tazo tea. Once determined, the strategy is categorized as one of the 5 Generic Competitive Strategies. Broad differentiation is a strategy that is applied across an industry, appealing to a broad range of shoppers. Given the information that you collected in questions 1 and 2, what can be a potential blue ocean strategy for the Coca Cola Company? Schultz’s strategy is to keep Starbucks’ partners happy and passionate about their work through compensation, benefits, and company culture. The corporate strategy in these cases is about the basic direction of the firm as a whole. Cost leadership strategyis vulnerable to the risks, such as relying on scale or experience as entry barriers. His expectations in return are to retain employees (reducing training and turnover expenses) and generate revenue (through customer satisfaction). Buyer loyalty is … b) Use the key criteria [rare, valuable, costly to imitate, and non-substitutable] to determine if Coca Cola has competitive parity or temporary competitive advantage in the soft drink industry. Remember, I have offered this set of essays for several years and I have been able to get a consistent perspective on what I am looking in the answers and with the rubric that I use, it is possible to assign a grade in about 10-15 minutes. b) Choose the most appropriate one to recommend for the Coca Cola Company. The Cons of Differentiated Instruction. The focus strategy is one of three generic strategies that Professor Porter created at the time: cost leadership, focus, and differentiation. 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