Q1. Differentiation Strategy Prof. (Dr.) Nitin Zaware Prof. (Dr.) Nitin Zaware 1 2. By definition, the differentiation strategy is focused on a higher margin, smaller market share. A differentiation strategy offers important advantages and disadvantages for firms that adopt it. Starbucks offers their partners the opportunity to purchase company stock through payroll deductions. Types of Strategies – Cost Leadership ,Differentiation , Focus. https://www.coca-colacompany.com/company/coca-cola-system, https://investors.coca-colacompany.com/strategy, https://investors.coca-colacompany.com/financial-information. Reference – Crafting & Executing Strategy by Thompson McGraw-Hill, 18th edition ISBN # 9780078112720, Your email address will not be published. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. 1. A focused cost leadership strategy requires Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. The Coca Cola Company has been using a broad differentiation strategy to compete in the American soft drink industry for the last decades. Please use the 5 elements of strategy to describe how your proposed blue ocean strategy will be implemented. There are several ways an organization can create a differentiation-based competitive advantage for a single product or the company as a whole. Cost leadershipimposes severe burdens on the firm to keep up its position, which means reinvesting in modern equipment, ruthlessly scrapping obsolete assets, avoiding product line proliferation and being alert for technological improvements. Large companies strive to differentiate their cereal brand as a higher quality than cheaper cereals. His expectations in return are to retain employees (reducing training and turnover expenses) and generate revenue (through customer satisfaction). Copyright © 2021 A+ Professional Essay Writing Services:- All rights reserved. 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. Once determined, the strategy is categorized as one of the 5 Generic Competitive Strategies. Advantages and Disadvantages of Differentiation. The traditional method to achieve this objective is to produce on a large scale which enables the business to exploit economies of scale. They are able to hook customers with the quality and service provided in their coffee shops which leads to customers’ purchases of other Starbucks labeled items such as bottled coffees in grocery stores or Starbucks brand liqueur at the liquor store. Differentiation strategy 1. These categories are: Starbucks employs a broad differentiation strategy. Diversification is a form of corporate strategy designed to improve opportunities for growth and profitability. Required fields are marked *. 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. Advantages and Disadvantages of Product Differentiation. Then they cheerfully accept their strengths as differentiators. 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). Training programs must be comprehensive to support the customer service differentiation but can be expensive. Some of thes… Advantages Of Product Differentiation. Coleman camping equipment offers a good example. A Cost Leader is where the company has … 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 differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. Your email address will not be published. Broad Differentiation Strategy . I am providing the latest information from the Coca Cola Co. Competitive Advantage cannot be fully understood by considering an organisation in general. Cost Leader. Q3. NRS 451VN Week 1 Assignment: Professional Resume and Cover Letter, NR510 Week 1: Barriers to Practice Discussion, Economic Growth and Education Level in China. 2. b) Choose the most appropriate one to recommend for the Coca Cola Company. As editors of the Wiley Encyclopedia of Management 3e, Vol. Differentiation strategies have … Continued innovation and quality improvement a… They accommodate what their buyers view as valuable and are able to create demand at a profitable price. The goal is to produce goods or services at the lowest possible cost by organizing every potential resource around the current production methods. Below we illustrated a few examples in relation to an often differentiated product – women’s handbag. 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. 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. They have done the trusty old SWOT analysis and listed their strengths and weaknesses. Cost declines with cumulative volume are by no means automatic, nor is reaping all available economies of scale achievable without significant attention. 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. They are well-positioned in the market with a plentiful amount of easy to access stores. Cost leadership styles focus on resource organization. One weakness of using a differentiation strategy involves the challenge of changing the customer perception. Each generic strategy offers advantages that firms can potentially leverage to enjoy strong performance, as well as disadvantages that may damage their performance. I feel that you do not need more than this company information and your reading from the book to properly answer the questions. 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. Additionally, a differentiation strategy relies on effective and productive human resources. There could be small businesses or involved in a single business or a large, complex and diversified conglomerate with several different businesses. 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. Advantages and disadvantages of Coca cola joint ventures for diversification. In a differentiated classroom, teachers recognize that all students are different and require varied teaching methods to be successful. All of the six strategies designed by porter enlists the interaction between pr… a) Please provide a very detailed analysis of the Coca Cola company’s resources and capabilities. 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. Losing the perceived customer quality differentiation is devastating to this strategy. Starbucks is also well known for quality products, with stringent guidelines outlining how their coffees are to be prepared, as detailed as espresso must be served within twenty-three seconds of brewing. Q2. Schultz’s strategy is to keep Starbucks’ partners happy and passionate about their work through compensation, benefits, and company culture. If the achieved selling price can at least equal (o… broad across-the-board: broad in scope or content; "across-the-board pay increases"; "an all-embracing definition";… The Disadvantages of Differentiated Marketing. Starbucks has secured a competitive advantage with its unique, yet diversifying product offerings. 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. Based on this information. Product differentiation occurs on two clear levels: vertical and horizontal. 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.. Once determined, the strategy is categorized as one of the 5 Generic Competitive Strategies. Figure 5.10 image description: Executing a Differentiation Strategy. 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. Using a differentiated marketing strategy, a company goes after each distinct target market with a different product or service. There are essentially two factors that identify competitive strategies. 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. Cost Leadership and Differentiation. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). Product differentiation is economically advantageous to a company. 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; 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. 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. 1. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). Buyer loyalty is … Corporate level strategy implies the notion of creating value by deciding in which businesses a company may compete. Vertical differentiation refers to products that fall on a scale from best to worst, highest to lowest, impacting the overall functionality of the item. Many consumers perceive the product as equivalent to alternative products offered in the marketplace at a lower price. These categories are: Starbucks employs a broad differentiation strategy. The idea here is simple. The corporate strategy in these cases is about the basic direction of the firm as a whole. Difficulty in the pricing of goods that are not new into the market. 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). As mentioned above, Porter suggested either of the three strategies to survive in a competitive business. A firm must have strong marketing capabilities and effective quality assurance. Starbucks target market is large enough to offer continued growth potential and attractive profits. 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. AVOID buying essays online or even googling for Coca Cola SWOT\’s or other blogs/strategic aspects as the worst thing that you can do is get a fail score in this comprehensive exam. Cost leadership strategyis vulnerable to the risks, such as relying on scale or experience as entry barriers. With this strategy, the objective is to become the lowest-cost producer in the industry. The Coca Cola Company has been using a broad differentiation strategy to compete in the American soft drink industry for the last decades. Pursuing a differentiation strategy requires a larger financial investment from the company, another weakness. Sara Lee’s Cookie Crumbles – 2 Business Units Survive, Starbucks – Pursues a Broad Differentiation Strategy. Businesses looking to build a broad or focused differentiation strategy will need to produce or design extremely unique or distinctive products or services that create increased value for the consumer. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry. The differentiation strategy is closel Broad differentiation strategy for many companies often relies on strengths. advantages and disadvantages of differentiation strategy pdf. Advantages and disadvantages of Coca cola joint ventures for diversification. The different factors on which the process is implemented include: 3. 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