Page 135 - DCOM102_DMGT101_PRINCIPLES_AND_PRACTICES_OF_MANAGEMENT

Unit 7: Organising

than one with fewer resources. This deep-pocket strategy provides a short-term advantage Notes
only. If a firm lacks the capacity for continual innovation, it will not sustain its competitive
position over time.

Notes Drivers of Differentiation
1. Unique product features
2. Unique product performance
3. Exceptional services

4. New technologies
5. Quality of inputs
6. Exceptional skill or experience
7. Detailed information

7.5.2 Advantages of a Differentiation Strategy

Differentiation strategy provides defenses against various threatening competitive forces like
those in the form of rivals, buyers, suppliers, potential entrants, substitutes, etc.
1. Rival Competitors: Buyers develop loyalty to brand they like best.

2. Buyers: Mitigates bargaining power of large buyers since other products are less attractive.
3. Suppliers: Seller may be in better position to withstand efforts of suppliers to raise prices.
4. Potential Entrants: Buyer loyalty acts as entry barrier.
5. Substitutes: Better positioned to fend off threats of substitutes based on customers'
attachment to differentiating attributes.
What is the significance of Hall's studies in differentiation?
William K. Hall conducted an in-depth study of 64 companies from eight major domestic
industries. These industries were mature, faced relatively hostile environments, had below-
average profitability and growth. Yet within each of these industries were several very profitable
firms.
Hall concluded that the two (non-diversified) top performing companies in each of the eight
industries had pursued either a differentiation strategy involving a high product/service/quality
position or a low-cost strategy or both.
Although Hall identified two strategic thrusts, there are obviously a wide variety of ways to
pursue each of them. In particular, whereas General Motors and Goodyear achieved their low-
cost position with high market share and considerable vertical integration, Inland Steel,
Whirlpool. Miller, and Philip Morris all relied upon modern, automated process technologies
and efficient distribution systems.

Similarly, the "meaningful differentiation" strategies were based upon a variety of approaches.
Prominent were such positioning elements as brand prestige, product quality, product reliability,
service, and distribution.

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