1. © R.Kernochan, 20051 The Strategic Gestalt S STRATEGY F FIRM E ENVIRONMENT or MARKET

2. © R.Kernochan, 20052 Strategic Gestalt: Differentiation S Differentiation STRATEGY F FIRM E ENVIRONMENT or MARKET

3. © R.Kernochan, 20053 Differentiation Strategy It is: selling products or firm attributes that have unique value for the customer –Above average returns come from charging a premium price for desired products and/or product features selling more at the same price dampening cyclical downturns For the firm, it means: Working to obtain a customer-valued difference relative to the competition

4. © R.Kernochan, 20054 Generic Strategies & the Concept of Proximity (Parity) Cost Leader firms compete with Differentiators & vice-versa. There is a limit to how much extra consumers will pay for valued features, or how many features they will give up to pay less. Hence concept of promimity/parity or closeness.

5. © R.Kernochan, 20055 Proximity (Parity) Generic StrategyType of Proximity Cost LeadershipFeature DifferentiationCost

6. © R.Kernochan, 20056 Differentiation Strategy: Important Issue Differentiation is poorly specified, “all other.” –Very general description –Cost Leadership could be form of differentiation –Doesn’t distinguish among different types of “differentiation” Remedy: ALWAYS specify what kind of differentiation strategy: –Company is seeking CA based on what? –Examples: Coca-Cola based on image, association with energy, fun Ford: Quality is Job 1 (but is it?) Marlboro: lifestyle, personal qualities

7. © R.Kernochan, 20057 Core Question: If all firms focus on differentiation to some degree, how do I tell which ones are following a differentiation strategy? how do I tell which ones have a differentiation competitive advantage?

8. © R.Kernochan, 20058 Some Clues: what will I see? (1) Above average returns (no CA without AAR) Most firms seek, perceive differences –Not all differences are valued by the customer Dominant cultural values concern product differences & customer value for those diff. –“customer-driven” firm –“customer comes first” at all levels of the org.

9. © R.Kernochan, 20059 Some Clues: what will I see? (2) Firm Actions –Investments in the value chain that increase buyer value: new products, product features, perceived differences. –Small changes in cost can have large buyer effects –Examples –Mergers to obtain new competencies, products –Quality that increases perceived differences –Other Actions R & D investments: product emphasis Sometimes: speed to market

10. © R.Kernochan, 200510 Uniqueness Drivers Policy changes: what activities to perform and how to perform them Linkages: –Within value chain –Backwards or forwards in chain –Important if the way one activity is performed affects the performance of another

11. © R.Kernochan, 200511 Some Examples of Policy Changes Product features Product performance Intensity of activity (e.g., advertising) Content of activity Technology employed Input quality Personnel procedures Personnel skill Personnel experience Information employed to control activity