The document discusses differentiation strategy as a means for firms to gain competitive advantage by adding unique value to products or services. It outlines the advantages of differentiation, such as reduced rivalry and increased customer loyalty, while also noting limitations like the difficulty of sustaining differentiation and the risk of imitation by competitors. The content emphasizes the importance of effectively communicating the differentiation benefits to maintain consumer perception of value.

1. Differentiation
Strategy
Prof. (Dr.) Nitin Zaware
Prof. (Dr.) Nitin Zaware 1

2.  There could be small businesses or involved
in a single business or a large, complex and
diversified conglomerate with several different
businesses.
 The corporate strategy in these cases is
about the basic direction of the firm as a whole. In
the case of the small firm, it could mean the
adoption of courses of action that would yield a
better profit for the firm.
 Business level strategies are concerned with
a firm’s industry position relative to those of
competitors.
 Corporate-level strategies are about the
choice of direction that a firms adopts in order to
achieve its objectives.
2Prof. (Dr.) Nitin Zaware

3.  The concept of generic strategies for
gaining competitive advantage has received
considerable attention recently in the
business policy field. Competitive Strategy,
a modern classic of business thinking,
provides a strong conceptual foundation for
developing corporate strategy.
 Generic competitive strategies are the
marketing strategy any of three strategies
for marketing products or services: cost
leadership, differentiation, and focus.
 The Differentiation Strategy refers to
adding value to products or services.
3Prof. (Dr.) Nitin Zaware

4. Differentiation Strategy:
With the differentiation strategy, the unique
attributes and characteristics of a firm’s
product provide value to customers.
Achieving Differentiation :
Such differentiation can be achieved by
adopting following things.
1) A firm can use high-quality raw material
inputs, superior process technology, speedy
and reliable distribution or better after-sales
support.
4Prof. (Dr.) Nitin Zaware

5. 2) It can incorporate features that offer utility for the
customers and match their tastes and preferences.
3) It can provide responsive customer service.
4) It can look for rapid product innovations and
technological leadership.
5) It can incorporate features that enable the
customers to claim distinctiveness from other
customers and enhance their status and prestige
among the buyer community.
5Prof. (Dr.) Nitin Zaware

6. Benefits of Differentiation Strategy
Benefits
Reduces
Competitive
Rivalry
Bargaining
Power of
Suppliers
Entry
Barriers
Negligible
Threat of
Product
Substitutes
6Prof. (Dr.) Nitin Zaware

7. Benefits of Differentiation Strategy :
1) Reduces Competitive Rivalry :
It reduces customer’s sensitivity to price
increases. Customer brand loyalty too acts
as a safeguard against competitors.
2) Bargaining Power of Suppliers :
A firm implementing the differentiation
strategy charges a premium price for its
products. So the suppliers must provide it
with high quality parts.
7Prof. (Dr.) Nitin Zaware

8. 3) Entry Barriers :
Customer loyalty and the need to overcome
the uniqueness of a differentiated product
are substantial entry barriers faced by
potential entrants.
4) Negligible Threat of Product
Substitutes :
Firms selling the differentiated goods or
services are positioned effectively against
product substitutes.
8Prof. (Dr.) Nitin Zaware

9. Limitations to Differentiation Strategy
Limitations
Difficulty in
Sustaining
Differentiation
Over
Differentiation
Limit to
Price
Premiums
Failure to
Communicate
Benefits
Imitation of
Differentiation
9Prof. (Dr.) Nitin Zaware

10. Limitations to Differentiation Strategy :
1) Difficulty in Sustaining Differentiation :
In a growing market, products tend to become
commodities. This is the case with the markets with
most industries in India. The basis for differentiation is
long-term perceived uniqueness. It is difficult to sustain.
There is an imminent threat from competitors who can
imitate the differentiation strategy.
2) Over Differentiation :
Differentiation fails to work if its basis is something that
is not valued by the customer. This often happens in a
case where unnecessary features are added for
differentiation. Such things also occur when over-
differentiation is done, carrying little tangible benefit for
the customer.
10Prof. (Dr.) Nitin Zaware

11. 3) Limit to Price Premiums :
Price premiums too have a limit. Charging too high a
price for differentiated features may cause the
customers to forego the additional advantage from a
product/service on the basis of their own cost-benefit
analysis.
4) Failure to Communicate Benefits :
The firm may fail to communicate the benefits arising
from differentiation adequately. It may happen that the
firm may rely too much on the fact that the intrinsic
product attributes are readily apparent to a customer.
This may cause the differentiation strategy to fail.
11Prof. (Dr.) Nitin Zaware

12. 5) Imitation of Differentiation :
A firm’s means of differentiation no longer provide
value for which customers are willing to pay. The
differentiation strategy becomes less valuable if
imitation by rivals causes customers to perceive
that competitors offer the same goods or service,
sometimes at a lower price.
12Prof. (Dr.) Nitin Zaware