Once determined, the strategy is categorized as one of the 5 Generic Competitive Strategies. Broad differentiation is a strategy that is applied across an industry, appealing to a broad range of shoppers. Sara Lee’s Cookie Crumbles – 2 Business Units Survive, Starbucks – Pursues a Broad Differentiation Strategy. Starbucks target market is large enough to offer continued growth potential and attractive profits. Training programs must be comprehensive to support the customer service differentiation but can be expensive. Q1. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. These categories are: Starbucks employs a broad differentiation strategy. Corporate level strategy implies the notion of creating value by deciding in which businesses a company may compete. Cost leadership styles focus on resource organization. These categories are: Starbucks employs a broad differentiation strategy. The traditional method to achieve this objective is to produce on a large scale which enables the business to exploit economies of scale. 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. The Coca Cola Company has been using a broad differentiation strategy to compete in the American soft drink industry for the last decades. Please do the following, a) Discuss the advantages and disadvantages of all these different means to achieve diversification. Advantages and disadvantages of Coca cola joint ventures for diversification. Your email address will not be published. Advantages and Disadvantages of Product Differentiation. Coleman camping equipment offers a good example. Differentiation strategy 1. His expectations in return are to retain employees (reducing training and turnover expenses) and generate revenue (through customer satisfaction). Many (perhaps all) market segments in the industry are supplied with the emphasis placed on minimising costs. 1. Why is cost leadership potentially so important? A broad differentiation strategy: Trying to differentiate different ways of delivering company products from competitors that will appeal to a wider range of customers [Some examples are Nordstrom (known for customer service policies and staff) and Whole Foods (emphasis on health foods and organic groceries) Advantages Of Product Differentiation. 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. Diversification is a form of corporate strategy designed to improve opportunities for growth and profitability. Starbucks serves a market that is defined by coffee drinkers. There could be small businesses or involved in a single business or a large, complex and diversified conglomerate with several different businesses. Starbucks has secured a competitive advantage with its unique, yet diversifying product offerings. Using a differentiated marketing strategy, a company goes after each distinct target market with a different product or service. 1. A differentiation strategy offers important advantages and disadvantages for firms that adopt it. The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. Each generic strategy offers advantages that firms can potentially leverage to enjoy strong performance, as well as disadvantages that may damage their performance. Cost declines with cumulative volume are by no means automatic, nor is reaping all available economies of scale achievable without significant attention. Please do the following, a) Discuss all the General Segments of the Environment and the Five Forces Model to analyze the external conditions affecting the Coca Cola Co in the US market. They accommodate what their buyers view as valuable and are able to create demand at a profitable price. They have done the trusty old SWOT analysis and listed their strengths and weaknesses. Pursuing a differentiation strategy requires a larger financial investment from the company, another weakness. 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). Consider cereal. The Disadvantages of Differentiated Marketing. Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. Q3. 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. advantages and disadvantages of differentiation strategy pdf. The idea here is simple. Please use the 5 elements of strategy to describe how your proposed blue ocean strategy will be implemented. Copyright © 2021 A+ Professional Essay Writing Services:- All rights reserved. a) Please provide a very detailed analysis of the Coca Cola company’s resources and capabilities. Advantages and disadvantages of Coca cola joint ventures for diversification. 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.. There are several ways an organization can create a differentiation-based competitive advantage for a single product or the company as a whole. Advantages and Disadvantages of Differentiation. The focus strategy is one of three generic strategies that Professor Porter created at the time: cost leadership, focus, and differentiation. Continued innovation and quality improvement a… 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. A focused cost leadership strategy requires Broad Differentiation Strategy . 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. By definition, the differentiation strategy is focused on a higher margin, smaller market share. Starbucks offers their partners the opportunity to purchase company stock through payroll deductions. The goal is to produce goods or services at the lowest possible cost by organizing every potential resource around the current production methods. 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. Posted October 11th, 2020. Some of thes… The Coca Cola Company has been using a broad differentiation strategy to compete in the American soft drink industry for the last decades. Losing the perceived customer quality differentiation is devastating to this strategy. Starbucks strategy, combined with its unwillingness to compromise quality in any circumstances and passionate leadership under the direction of Howard Schultz, CEO, has Starbucks well positioned to remain profitable and a leader in this market niche. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). 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. Advantages and disadvantages of Coca cola joint ventures to achieve diversification Order 100% Plagiarism Free Paper Now. Additionally, a differentiation strategy relies on effective and productive human resources. In 2007, department store Dillard’s stopped carrying men’s sportswear made by Nautica because the seafaring theme of Nautica’s brand had lost much of its cache among many men. 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. Q1. There are essentially two factors that identify competitive strategies. 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. The differentiation strategy is closel Based on this information. Types of Strategies – Cost Leadership ,Differentiation , Focus. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). The Cons of Differentiated Instruction. Focused cost leadership is the first of two focus strategies. Q2. As a product remains in the market for longer consumers become smarter about the prices and thus the premium charges being charged can no longer be sustained. 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. This strategy is concentrated on a broader segment of the total market. Q4. 2. Buyer loyalty is … Cost leadership strategyis vulnerable to the risks, such as relying on scale or experience as entry barriers. 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. Product differentiation is economically advantageous to a company. They are well-positioned in the market with a plentiful amount of easy to access stores. b) Choose the most appropriate one to recommend for the Coca Cola Company. In a differentiated classroom, teachers recognize that all students are different and require varied teaching methods to be successful. As mentioned above, Porter suggested either of the three strategies to survive in a competitive business. Figure 5.10 image description: Executing a Differentiation Strategy. Schultz’s strategy is to keep Starbucks’ partners happy and passionate about their work through compensation, benefits, and company culture. Differentiation strategies have … 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. Reference – Crafting & Executing Strategy by Thompson McGraw-Hill, 18th edition ISBN # 9780078112720, Your email address will not be published. Other firms may out differentiate the existing firms by introducing better unique products into the market. Large companies strive to differentiate their cereal brand as a higher quality than cheaper cereals. Broad differentiation strategy for many companies often relies on strengths. 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). If the achieved selling price can at least equal (o… Differentiation Strategy Prof. (Dr.) Nitin Zaware Prof. (Dr.) Nitin Zaware 1 2. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry. Competitive Advantage cannot be fully understood by considering an organisation in general. Then they cheerfully accept their strengths as differentiators. 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; Vertical differentiation refers to products that fall on a scale from best to worst, highest to lowest, impacting the overall functionality of the item. 3. 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. One weakness of using a differentiation strategy involves the challenge of changing the customer perception. This strategy is concentrated on a broader segment of the total market. Companies can engage in diversification efforts by different means [mergers, acquisitions, joint ventures, strategic alliances, or international expansion]. Cost Leader. broad across-the-board: broad in scope or content; "across-the-board pay increases"; "an all-embracing definition";… Despite the stagnant growth in the industry, its leading brand, Coke, remains the market leader and it can be considere8i9d as a cash cow for the company. Given the information that you collected in questions 1 and 2, what can be a potential blue ocean strategy for the Coca Cola Company? The different factors on which the process is implemented include: Differentiation is the educational practice of modifying or adapting instruction, school materials, subject content, class projects, and assessment methods to better meet the needs of diverse learners. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. https://www.coca-colacompany.com/company/coca-cola-system, https://investors.coca-colacompany.com/strategy, https://investors.coca-colacompany.com/financial-information. 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. Product differentiation occurs on two clear levels: vertical and horizontal. 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. All of the six strategies designed by porter enlists the interaction between pr… 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. Once determined, the strategy is categorized as one of the 5 Generic 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. A strategy directed toward creating something that is perceived as being unique. 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. I am providing the latest information from the Coca Cola Co. 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. With this strategy, the objective is to become the lowest-cost producer in the industry. b) Use the key criteria [rare, valuable, costly to imitate, and non-substitutable] to determine if Coca Cola has competitive parity or temporary competitive advantage in the soft drink industry. Below we illustrated a few examples in relation to an often differentiated product – women’s handbag. I feel that you do not need more than this company information and your reading from the book to properly answer the questions. The corporate strategy in these cases is about the basic direction of the firm as a whole. Product differentiation means that your product has one or more distinct attributes that separate it from competitors. Many consumers perceive the product as equivalent to alternative products offered in the marketplace at a lower price. The company must use only one out of three competitive strategies. A firm must have strong marketing capabilities and effective quality assurance. 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