It is a business strategy whereby firms attempt to gain a competitive advantage by increasing the perceived value of their product and services relative to the perceived value of other firms.
Ex- Google Basis of product differentiation Attributes of its products or services: Product features Product complexity Timing of product introduction
Relationships with customers: Product customisation Customer marketing Product reputation Linkages within or between firms: Among functions within With other firms Product mix Distribution channels Service and support The Value of Product Differentiation Product Differentiation and Environmental Threats Threat of New entry Threat of Rivalry Threat of Substitutes Threat of powerful suppliers Threat of powerful buyers. Product Differentiation and Environmental Opportunities:
Fragmented industries: Example: XEROX
Emerging industries: First mover advantage-captures market share
Mature Industries: Refining and Improving product & services
Rareness for Product Differentiation A customer preferences are evidence of a differentiated product-
increased volume of purchases and or premium price. Imitability of Product Differentiation Sources of costs of imitation Historical uniqueness Causal ambiguity Social complexity
Substitutes If a base of differentiation is valuable, others will attempt to imitate it through duplication and/or substitution If no substitutes are obvious, then we would conclude that imitation through substitution will be costlyat least for the present time
Organizing for Product Differentiation Organizational Structure U-Form with cross-functional teams Complex matrix structure
Cost Leadership and Product Differentiation Can a firm pursue both simultaneously? No Yes use of structure, management control, and compensation policies are nearly opposites firms can do both because some bases of differentiation also lend themselves to low cost Example: McDonald Example: Rolex structure, controls, & policies are not opposites Thank You...