Differentiation

Topics: Automotive industry, BMW, General Motors Pages: 3 (922 words) Published: December 15, 2013
Differentiation is a strategy that creates product that is unique among firms in the same industry in an important way. A differentiator achieved competitive advantage easily upon the ability in providing distinctive products to its customers that satisfy their needs in a way that is different from its competitors (Hill and Jones, 2004, p160.).This allows the differentiator to charge on premium price for its products. Unlike cost leaders performing cost reduction, differentiators manage to increase their revenue with the premium price product and this allows differentiators to reach the value of creation frontier, outperforming competitors and achieve superior profitability. Perception of customers towards the quality of products overrules the concern towards the premium price charged. Thus, paying extra is not an issue as to weight on the value. Product differentiation is the various methods of multi-product firms developing and offering products’ range of its own (Piana, 2003).Three (3) types of product differentiations are introduced which are vertical, horizontal, and mixed differentiations. Vertical differentiation is the property of the produced goods where perception towards qualities is the crucial role in the buying decision. For example, the product with ingredients ranked (olive oil, mais oil, palm oil, mixed oil) would be delivered in descending order. Such differentiation occurred within the market with goods that can be ordered according to quality; best to the lowest quality. As for horizontal differentiation, its emergence is based on products features however products cannot be ordered objectively. It relates to the differentiation of colours, styles, flavours, shapes and other product attributes. For instance, ice-cream with different flavours; chocolate and vanilla have its respective demand according to customers’ preference which is not affected by the product line structure. Mixed differentiation however, is the combination of vertical and...
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