Differentiation Advantage The nature of differentiation

Differentiation Advantage

• The nature of differentiation

• Differentiation and segmentation

• Analyzing differentiation: the demand side

• Analyzing differentiation: the supply side

• Bringing it all together: value chain analysis

The Nature of Differentiation

Value Equivalence Line

Differentiation and Segmentation

• DIFFERENTIATION: is concerned with how a firm competes within

• a market.

• SEGMENTATION: is concerned with where a firm competes

• within a market.

• Does differentiation imply segmentation?

• Not necessarily, depends upon the differentiation strategy:

• BROAD SCOPE DIFFERENTIATION: Appealing to what is in common between different customers (McDonalds hamburgers, Honda cars, Sears)

• FOCUSED DIFFERENTIATION: Appealing to what distinguishes different customer groups (BMW, Doc Marten footwear)

Differentiation vs. Cost Leadership as a Basis for Sustained Competitive Advantage

Differentiation and the Product Life Cycle

Analyzing the Demand Side

• Techniques for analyzing product attributes and

• positioning:

• Multidimensional Scaling

• Conjoint Analysis

• Hedonic Price Analysis

Differentiation in Pain Relievers: Multidimensional Scaling of Competing Products in the U.S.

Identifying Differentiation Potential: The Demand Side

Differentiation of Hardware and Software

Consistency of Differentiation Strategy: Product Integrity

• Key to successful differentiation is consistency of all aspects of the firm’s relationship with its customers.

• Product Integrity: the total balance of product features

• Internal integrity: consistency between function and structure
• External integrity:fit between the product and the customers’ objectives, values, lifestyle etc..

The Impact of Quality on Profitability

Using the Value Chain to Identify Differentiation Potential on the Supply Side

Identifying Differentiation Opportunities through Linking the Value Chains of the Firm and its Customers: Can Manufacture