The smart pricing, differentiation, branding, marketing, asset, and targeting strategies make some brands, products, and services to be perceived as superior to others. The development of theories that help explain competitive advantage has occupied the attention of the management. It describes how the choice of competitive scope, or the range of a firms activities, can play a powerful role in determining competitive advantage. Product differentiation definition, types, importance. Porters competitive advantage explores the underpinnings of competitive advantage in the individual firm. The business strategy is a detailed plan outlined on how to deliver value to customer at the same time positioning itself as having a competitive advantage over the competitor. It allows businesses to offer their target market a product or service with higher value than. Based on the theory of competitive advantage, competitive advantage consists of two main dimensions, namely lowcost advantage and differentiation advantage as the key in achieving superior performance porter, 1980. In other words, its something that a company does better than its competitors because of some proprietary process, service, or brand. A competitive strategy articulates a firms goals, how it will compete, and its policies for achieving those goals. That the phrases competitive advantage and sustainable competitive advantage have become commonplace is testimony to the power of porters ideas. Competitive advantage creates opportunity for new products to disrupt incumbent industries and it helps create a moat of defence against the onslaught of competition. Product differentiation is the introduction of unique, distinctive characteristics or features to a product to ensure usp unique selling proposition of the product. Five business level strategies definition marketing.
The company is able to utilize economies of scale and produce products at a low cost and as a. The essential complement to the pathbreaking book competitive strategy, michael e. In this post im going to be focusing on differentiation, but it is important to understand why differentiation is a strategy and how it relates to competitive advantage. As editors of the wiley encyclopedia of management 3e, vol. The use of differentiation strategy by libraries to gain. Competitive advantage learn how a competitive advantage works. Maintaining competitive advantage is crucial to many businesses or organizations success in order to survive in the market. Product differentiation as defined in this thesis can provide competitive. Competitive advantage provides an edge over the competition.
Competitive advantage essay sample new york essays. Determinants of personnel differentiation for competitive. Although, competitive advantage has taken centre stage in discussions of business strategy, a definite definition of the term is quite elusive. Differentiated productsservices in a narrow market segment competitive advantage in the marketplace. There are two basic types of competitive advantage. Finally, take advantage of a competitive advantage it could also mean convert that advantage into a business opportunity. Pdf differentiation for competitive advantage in a. Eachstakes outadifferent market position a broad crosssection gi of buyers gi iii a narrovlf buyer segment or market niche overall lovvcost provider strategy broad diherentiation strategy focused lovvcost strategy lovlfercost differentiation type of competitive advantage being. Differentiation advantage low price strategies high nonprice strategies market segmentation low mass market high many mark ets distinctive competences manufacturing and buying marketing. Competitive differentiation is a process that helps buyers distinguish your firm from similar competitors and give them a compelling reason to select you. Competitive advantage introduces a whole new way of understanding what a firm does.
At its most fundamental, though, competitive advantage means achieving a bigger gap than your competitors between the value your customers see in your product and the costs you incur in providing that product. Businesses first utilized this competitive advantage method of success. Past, present, and future the fundamental basis of longrun success of a firm is the achievement and maintenance of a sustainable competitive advantage hereafter sca. Feb 20, 2019 competitive advantage is a set of qualities that give businesses leverage over their competition.
Porters groundbreaking concept of the value chain disaggregates a company into activities, or the discrete. 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 competitive advantage cannot be fully understood by considering an organisation in general. Finnish grocery trade 2016 accessed 3 january 2017. A competitive advantage is an advantage gained over competitors by offering customers greater value, either through lower prices or by providing additional benefits and service that justify similar, or possibly higher, prices. Investment companies can reduce risks by investing in different assets and forming a portfolio. Competitive advantage is a theory that seeks to address some of the criticisms of comparative advantage. Market and entrepreneurial orientation perspective. Hoffmann an examination of the sustainable competitive advantage concept 1 an examination of the sustainable competitive advantage concept.
These strategies lead to a state of competitive advantage which makes the business cater to morethanaverage customers and earn morethanaverage profits. Corporate social responsibility and firm performance. In diversity analysis, there are two key elements including risk and output. Dec 14, 2019 a competitive advantage is what makes an entitys goods or services superior to all of a customers other choices. Can product differentiation be used to improve the competitive advantage of a printing. Competitive advantageca is an advantage competitors gain by providing or offering customers or consumers greater value for their money through product and service differentiation or through lower prices. Mcdonalds main competitive advantage relies on a cost leadership strategy. This book describes how a firm can gain a cost advantage or how it can differentiate itself. The strategies work for any organization, country, or individual in a competitive environment. Differentiation is the best strategy which may establish unique competitive advantage, and get higher sales and competitiveness. Competitive advantage is defined in terms of cost and differentiation while. Analysis of differentiation strategies to create competitive.
Aug 30, 2019 competitive advantages are conditions that allow a company or country to produce a good or service at a lower price or in a more desirable fashion for customers. After the indepth study of literature we concluded that learning organization is an organization which learns through its members individually and collectively to create competitive advantages by developing a. The purpose of this paper is to identify and explain how market orientation and entrepreneurial orientation helps a firm in effectively differentiating its product or service offerings in relation to its industry rivals. Cost leader a cost leader is where the company has decided to create the cheapest product on the market. Competitive advantages are conditions that allow a company or country to produce a good or service at a lower price or in a more desirable fashion for. In other words, a competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost cost advantage, or deliver benefits that exceed those of competing products differentiation advantage. Diversification strategies can influence the competitive balance in an industry. Competitive advantage is defined in terms of cost and differentiation while linking it to profitability. Service organization like banking is obvious for economic growth of any country.
May 06, 2020 competitive differentiation is a process that helps buyers distinguish your firm from similar competitors and give them a compelling reason to select you. It involves defining the offerings unique position in the market by explaining the unique benefit it provides to the target group. However, it seems that the differentiation strategy of a lot of products seems to not have been given a second thought. Product differentiation is a marketing process that showcases the differences between products.
May 22, 20 in this post im going to be focusing on differentiation, but it is important to understand why differentiation is a strategy and how it relates to competitive advantage. In this first post i will talk about how to gain competitive advantage through product differentiation. In order to make an offering compelling in the marketplace, an organization must clearly articulate to consumers the benefits of a product, service or brand and contrast its. Differentiation and its role in competitive advantage.
Allcompetitive advantage resides in the value chain. A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost cost advantage, or deliver benefits that exceed those of competing products differentiation advantage. Strategies for competitive advantage valueadded ag. While cost leadership differentiation strategies seek competitive advantage in a. A competitive advantage is what makes an entitys goods or services superior to all of a customers other choices. The moderating role of reputation and institutional investors pdf download available. Oct 12, 2019 product differentiation or just differentiation is a marketing process of differentiating an offering product or service from others in the market, to make it more appealing to the target audience. Studying the phenomenon of competitive advantage and. Generic strategies can help the organization to cope with the five competitive forces in the industry.
Theories for competitive advantage huiling wang introduction competitive advantage is obtained when an organisation develops or acquires a set of attributes or executes actions that allow it to outperform its competitors. Examples of firms that successfully used a lowcost leadership strategy to build competitive advantage include whirlpool in washers and dryers, black and decker. Research limitationsimplications the research covers a single case and therefore is only generalisable back to theory rather than to the. A superiority gained by an organization when it can provide the same value as its competitors but at a lower price, or can charge higher prices by providing greater value through differentiation. On one hand, product differentiation in industry analysis porter, 1979 operates via rivalry restraint.
Introduction human resource play vital role in every service organization to satisfy the customer. Mixed development can increase the number of discount stores, expand market share, and achieve the best growth strategy with highest sales rate in every discount store. Theories for competitive advantage research online. One way to reduce risks is to diversify investments. Swot analysis, differentiation, competitive advantage. Michael porter competitive strategies involve taking offensive or defensive actions to create a defendable position in the industry. In customers minds, a competitive advantage is what makes a company superior to others. A competitive advantage may include access to natural resources, such as highgrade ores or a lowcost power source, highly skilled labor, geographic location, high entry barriers, and access to new technology. Sep 25, 2019 the smart pricing, differentiation, branding, marketing, asset, and targeting strategies make some brands, products, and services to be perceived as superior to others. Competitive advantage a competitive advantage is an attribute that allows a company to outperform its. Eachstakes outadifferent market position a broad crosssection gi of buyers gi iii a narrovlf buyer segment or market niche overall lovvcost provider strategy broad diherentiation strategy focused lovvcost strategy lovlfercost differentiationtype of competitive advantage being. Differentiation looks to make a product more attractive by.
Studying the phenomenon of competitive advantage and differentiation. Sep 28, 2016 the competitive advantage model of michael e porter discovers that 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. To create a competitive advantage, youve got to be clear about these three determinants. Competitive advantage is a set of qualities that give businesses leverage over their competition. The cost leadership and differentiation strategies are not the only strategies used to gain competitive advantage. The five types of business level strategies are as follows. Competitive differentiation is a strategic positioning tactic an organization can undertake to set its products, services and brands apart from those of its competitors. How csr affects competitive advantage and reputation of firm. The essence of competitive advantage to begin, it may be helpful to take a more indepth look at what it means to have a competitive advantage. A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices. An examination of the sustainable competitive advantage.
Although some few studies have been done on the relationship between product differentiation strategies for competitive advantage, information on the strategies used in kenya is ostensibly missing in the literature. The discussion in the paper has been done from various perspectives in the light of relevant past and modern researches while keeping the focus towards explaining how market. Competitive advantage also provides for the first time the tools to strategically segment an industry and rigorously assess the competitive logic of diversification. Competitive advantage strategic management insight. A competitive advantage may include access to natural resources, such as highgrade ores or a lowcost power source, highly skilled labor, geographic location, high entry barriers, and. The differentiation allows a company to achieve a competitive advantage. It can also generate more value for a business and its shareholders. A competitive advantage is the unique ability of a firm to utilize its resources effectively, managing to improve customer value and position itself ahead of the competition. Competitive advantage results from matching core competencies to the opportunities. There are many options of differentiating a brand, depending on the companys internal capabilities and competitive environment. Haseeb mustafa 1, khaliq ur rehman 1, syed ahsan raza zaidi 2, fahad iqbal 3. Innovation strategy is used to develop new or better products, processes or business models that grant competitive edge over competitors.467 47 437 669 388 1209 990 524 1076 1022 261 1082 63 52 922 763 291 797 1370 773 226 1279 1119 195 920 1349 1123 662 1116 647 987 49 880 1060 1146 870 996 885 1247 917