Many (perhaps all) market segments in the industry are supplied with the emphasis placed on minimising costs. Q1. With this strategy, the objective is to become the lowest-cost producer in the industry. A firm must have strong marketing capabilities and effective quality assurance. Q2. Coleman camping equipment offers a good example. A Cost Leader is where the company has … A focused cost leadership strategy requires Broad Differentiation Strategy . 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. There are essentially two factors that identify competitive strategies. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. Large companies strive to differentiate their cereal brand as a higher quality than cheaper cereals. Additionally, a differentiation strategy relies on effective and productive human resources. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). 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. Please do the following, a) Discuss the advantages and disadvantages of all these different means to achieve diversification. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry. 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. Starbucks serves a market that is defined by coffee drinkers. 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. Cost leadership styles focus on resource organization. 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. Required fields are marked *. The traditional method to achieve this objective is to produce on a large scale which enables the business to exploit economies of scale. These categories are: Starbucks employs a broad differentiation strategy. They are well-positioned in the market with a plentiful amount of easy to access stores. 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. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. Other firms may out differentiate the existing firms by introducing better unique products into the market. Starbucks target market is large enough to offer continued growth potential and attractive profits. The differentiation strategy is closel Continued innovation and quality improvement a… Vertical differentiation refers to products that fall on a scale from best to worst, highest to lowest, impacting the overall functionality of the item. 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. By definition, the differentiation strategy is focused on a higher margin, smaller market share. Pursuing a differentiation strategy requires a larger financial investment from the company, another weakness. Companies can engage in diversification efforts by different means [mergers, acquisitions, joint ventures, strategic alliances, or international expansion]. Advantages Of Product Differentiation. They have done the trusty old SWOT analysis and listed their strengths and weaknesses. 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). I feel that you do not need more than this company information and your reading from the book to properly answer the questions. 2. 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. Q3. There could be small businesses or involved in a single business or a large, complex and diversified conglomerate with several different businesses. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). Then they cheerfully accept their strengths as differentiators. 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. 3. Losing the perceived customer quality differentiation is devastating to this strategy. These categories are: Starbucks employs a broad differentiation strategy. The corporate strategy in these cases is about the basic direction of the firm as a whole. Q1. 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; Each generic strategy offers advantages that firms can potentially leverage to enjoy strong performance, as well as disadvantages that may damage their performance. As mentioned above, Porter suggested either of the three strategies to survive in a competitive business. Once determined, the strategy is categorized as one of the 5 Generic Competitive Strategies. The advantages and disadvantages of the cost leadership styles show us that this process can be used to create a unique competitive advantage. They accommodate what their buyers view as valuable and are able to create demand at a profitable price. As editors of the Wiley Encyclopedia of Management 3e, Vol. 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. A strategy directed toward creating something that is perceived as being unique. One weakness of using a differentiation strategy involves the challenge of changing the customer perception. Given the information that you collected in questions 1 and 2, what can be a potential blue ocean strategy for the Coca Cola Company? Advantages and disadvantages of Coca cola joint ventures for diversification. This strategy is concentrated on a broader segment of the total market. 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.. The different factors on which the process is implemented include: Product differentiation means that your product has one or more distinct attributes that separate it from competitors. 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) 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. 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. broad across-the-board: broad in scope or content; "across-the-board pay increases"; "an all-embracing definition";… Broad differentiation is a strategy that is applied across an industry, appealing to a broad range of shoppers. The focus strategy is one of three generic strategies that Professor Porter created at the time: cost leadership, focus, and differentiation. All of the six strategies designed by porter enlists the interaction between pr… Competitive Advantage cannot be fully understood by considering an organisation in general. 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. Posted October 11th, 2020. Figure 5.10 image description: Executing a Differentiation Strategy. The company must use only one out of three competitive strategies. Broad differentiation strategy for many companies often relies on strengths. Starbucks offers their partners the opportunity to purchase company stock through payroll deductions. Focused cost leadership is the first of two focus strategies. Please use the 5 elements of strategy to describe how your proposed blue ocean strategy will be implemented. 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. Some of thes… Using a differentiated marketing strategy, a company goes after each distinct target market with a different product or service. I am providing the latest information from the Coca Cola Co. 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. Cost Leader. 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. 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. 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. The Disadvantages of Differentiated Marketing. The Cons of Differentiated Instruction. Cost leadership strategyis vulnerable to the risks, such as relying on scale or experience as entry barriers. Advantages and Disadvantages of Differentiation. 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. NRS 451VN Week 1 Assignment: Professional Resume and Cover Letter, NR510 Week 1: Barriers to Practice Discussion, Economic Growth and Education Level in China. A differentiation strategy offers important advantages and disadvantages for firms that adopt it. Consider cereal. Starbucks has secured a competitive advantage with its unique, yet diversifying product offerings. 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. 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. Training programs must be comprehensive to support the customer service differentiation but can be expensive. Schultz’s strategy is to keep Starbucks’ partners happy and passionate about their work through compensation, benefits, and company culture. Your email address will not be published. 1. Product differentiation is economically advantageous to a company. Once determined, the strategy is categorized as one of the 5 Generic Competitive Strategies. 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. If the achieved selling price can at least equal (o… Many consumers perceive the product as equivalent to alternative products offered in the marketplace at a lower price. Differentiation strategy 1. 1. Advantages and disadvantages of Coca cola joint ventures for diversification. Advantages and Disadvantages of Product Differentiation. Based on this information. Types of Strategies – Cost Leadership ,Differentiation , Focus. The idea here is simple. The Coca Cola Company has been using a broad differentiation strategy to compete in the American soft drink industry for the last decades. 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. 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. b) Choose the most appropriate one to recommend for the Coca Cola Company. Sara Lee’s Cookie Crumbles – 2 Business Units Survive, Starbucks – Pursues a Broad Differentiation Strategy. Buyer loyalty is … The Coca Cola Company has been using a broad differentiation strategy to compete in the American soft drink industry for the last decades. Why is cost leadership potentially so important? 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). advantages and disadvantages of differentiation strategy pdf. Difficulty in the pricing of goods that are not new into the market. His expectations in return are to retain employees (reducing training and turnover expenses) and generate revenue (through customer satisfaction). 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 a differentiated classroom, teachers recognize that all students are different and require varied teaching methods to be successful. 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. Differentiation strategies have … Advantages and disadvantages of Coca cola joint ventures to achieve diversification Order 100% Plagiarism Free Paper Now. There are several ways an organization can create a differentiation-based competitive advantage for a single product or the company as a whole. Below we illustrated a few examples in relation to an often differentiated product – women’s handbag. This strategy is concentrated on a broader segment of the total market. Reference – Crafting & Executing Strategy by Thompson McGraw-Hill, 18th edition ISBN # 9780078112720, Your email address will not be published. Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. Diversification is a form of corporate strategy designed to improve opportunities for growth and profitability. Q4. Corporate level strategy implies the notion of creating value by deciding in which businesses a company may compete. Differentiation Strategy Prof. (Dr.) Nitin Zaware Prof. (Dr.) Nitin Zaware 1 2. The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. https://www.coca-colacompany.com/company/coca-cola-system, https://investors.coca-colacompany.com/strategy, https://investors.coca-colacompany.com/financial-information. The goal is to produce goods or services at the lowest possible cost by organizing every potential resource around the current production methods. Cost Leadership and Differentiation. Product differentiation occurs on two clear levels: vertical and horizontal. 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