Evaluating A Business Differentiation Opportunities Marketing Essay

One of the key to success of a business is to make it become unique and different from others. No matter if you are in small business or operating as a big company, it is important to differentiate your products or services from your key competitors. So that it can help your company build brand loyalty from consumers, and they will be willing to purchase the products or services. As an example, a small manufacturer of air purifiers may set themselves apart from competitors with their superior engineering designs, which can capture what consumers want.

A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers, which customers feel the product or service is better than or different from the competitors. In other words, differentiation creates something that is perceived industry-wide as being unique and a good differentiation-based strategy follows generally accepted guidelines for both form and content (Porter, 1985). It may be achieved in various ways, for example through brand image, technology, customer service, and dealer network. There may be sorted into three primary parts that we will discuss in the report of a differentiation-based strategy. It will include the skill and resources that foster differentiation such as focus directly on product or service attributes. Besides that, it will also include the organization to support and sustain differentiation activities, for example consumer marketing or product reputation. And lastly are the examples of ways businesses achieve competitive advantage via differentiation.

According to Porter (1985), differentiation may generate superior profitability; brand loyalty by customers can provides insulation against competitive rivalry, and also resulting lower sensitivity to price. It also increases margins, which avoids the need for a low-cost position. The resulting customer loyalty and the need for a competitor to overcome uniqueness provide entry barriers. Differentiation yields higher margins from having to deal with supplier power, and it will influence buyer power. Besides reducing the five threats of entry, rivalry, substitutes, suppliers and buyers, differentiation creates value by enabling a firm to charge a premium price that is greater than the extra cost incurred by differentiation (Porter, 1985).

Skills & Resources That Foster Differentiation

A firm differentiates itself from its competitors and being unique to consumers with something that is valuable to them (Porter, 1985). There are skills and resources that foster differentiation in some big companies. Having strong marketing abilities of a company is one of the many skills of a firm to make a difference in how consumers view them. Apple Inc. have successfully market their i-products and is still taking the world by storm. It is the way Apple Inc. is promoting their products, partly because they know what their consumers want. Apple Inc. have a strong marketing team that has a marketing strategy of “excessively laced with emotions” (Pizarro, 2010) and hitting the right spot in consumers that will make them want to get their products to look “trendy”. Also, Apple Inc.’s marketing team knows the way to get their consumers hyped up for their upcoming products and being consistent in what they promised to their target market. Other than that, they have built a strong credibility of being “different” from their competitors by running a different operating system called the iOS, which Apple Inc. promised its operating speed and virus-free. This is why many of their customers prefer them and willing to spend their money on. Besides that, they also introduced a two-way camera on iPhones, iPod Touchs and iPads to communicate via their very own version of video chat called FaceTime, which is the trend-setter for all of their competitors.

Besides having good marketing abilities, being creative and flair in their products can be a form of competitive advantage which differentiates a company from the rest. Creativity in business is the ability to see connections between pieces of information and translate those connections into innovative products, services or ideas (Harman, 2011). Besides the usual smartphone innovation and creativity, the food and beverage industry is best to use as examples of this skill. For instance, Carlo’s Bakery from New Jersey, U.S. has their own award-winning team of cake designers and bakers, their Cake Factory and The Kitchen complete with state of the art baking and cooking facility (Carlo’s Bakery, n.d.). They employ highly qualified creative bakers or graduates from their own baking course to do frosting and designs of customized fondant or butter cream cakes for their customers. And this is the reason why customers prefer Carlo’s Bakery to customize cakes for special occasions (Carlo’s Bakery, n.d.). It is their team of creative and talented bakers that foster differentiation from all other competitors in the U.S. baking industry.

To foster differentiation from its competitors, a successful big company must have the capabilities to do a strong basic research. With the use of research and then development, the core competencies level increases, beside this competitive edge, profit, and market share will also expand, and with the use of R&D organization is able to get competitive edge, this also help organization to move profit to the peak (Dar & Ahmed, 2009). Starbucks Corp. has successfully done this by researching on many different coffee beans and brought wine to coffee that up marketed the brand and therefore created their premium beans. All thanks to their research and development department, from which they did 70 projects a year, with 8 of them leading to new beverages (Helm, 2007). Therefore, many consumers prefer Starbucks beverages for its varieties, lifestyle, and of course, quality. Starbucks’s capabilities to do a strong basic research have made it possible for consumers to see them as “different” in their beverages from all other competitors.

If a company is known for its products quality and technical leadership, Volvo has definitely achieved that in their cars. Consumers today rely heavily on product quality. As for Volvo customers, they trust its quality can bring safety on the road. Volvo cars are known as the “tough” ones. That is because Volvo made promise to their customers that their transportations, which has not only consist of cars, but buses, trucks and aero as well, are all focusing on quality, safety and environmental care (Volvo, n.d.), and customers recognized Volvo’s that represented their wishes for safe, quality products, but sophisticated (The Volvo Owners Club, n.d.). Therefore, Volvo has enough resources to demonstrate an excellent corporate reputation for their fine quality or technical leadership in manufacturing quality transportations. This is also why in the automobile business, consumers recognize Volvo cars as the safest cars to drive on the road, compared to the rest of the carmakers.

Toyota has more 200 domestic and foreign suppliers supplying nearly 2 billion units for their automobiles. Toyota also demonstrates a good example for strong cooperation from suppliers of major components of their product, which is also one of the resources that foster differentiation in their products. Therefore, having to deal with so many suppliers, Toyota prioritizes importance to long-term business relationship and mutual trust with their suppliers (n.a, n.d.). Toyota’s suppliers also maintain strong cooperation with the largest automakers in the world by carrying out activities like holding meetings for quality and defective issues, as well as conducting lectures on techniques on the automobile components, thus, this also serve as a mutual development among component suppliers (n.a, n.d.). Not only that, Toyota appointed certain suppliers as their sole supplier for some particular components, which leads to close collaboration and strong cooperation with their long-term suppliers with mutual benefits, and therefore together, they make it possible to achieve the “Just-In-Time” approach (The Economist, 2010). Unlike the Western automakers, they source in-house components from the lowest bidder, so because of Toyota’s excellent supply-chain management, many competitors have modelled its manufacturing and supply-chain management styles (The Economist, 2010).  

Organizational Requirements to Support Differentiation Activities

There are many key benefits that every business should try sustaining its differentiation-based strategy. Generally, a successful differentiation based strategy relies on customer perceptions of high value-for-money. The sustainability of that differentiation will depend on two things: A prolongation of its high received preferences in products and services to consumers and hard to imitate by its competitors. No doubt, the most tedious part of a differentiation approach to competitive advantage is the capability in protecting its value-enhancing differentiations, rather than creating a new line of product for the very first time. Thus, this boils down to a question on whether businesses can do anything to sustain positions of strength over long periods of time. In simple terms, a company needs to have the edge beyond its rivals in drawing customers and defending itself against competitive forces, and by then it has a competitive advantage. Competitive advantage equals to having competitive power in the market. Thus, it is vital for businesses to have a powerful competitive advantage because it allows the business to further attract customers of its offered products that meets customer’s expectations that can be produced via core competence. Core competence provides firms a set of differentiation in its products and services.

In general, the nature of differentiation is hard to quantify. Simply put, it is hard to value differentiation as it only can be roughly gage by buyers’ perception towards the bought products or services experienced from the particular business/brand. Thus, it is every sellers desire to achieve differentiation. This places the seller in a superior position to endure efforts of suppliers to increase prices. Furthermore, buyer loyalty serves as a barrier against potential entrants. Now because buyers have the tendency to develop brand loyalty from which they like best, in return helps seller to defeat rival competitors among the marketplace. All things considered, the competitive strength of differentiation strategy is that differentiation places seller in better position to fend off threats of substitutes which does not have comparable similar features or characteristics.

Tradition of closeness to key customers

7-Eleven formerly a Southland Corporation has practiced differentiation to avoid direct competition with large supermarket chains. It offers consumers greater convenience in the form of nearby location, shorter shopping time, and quicker checkout. It achieves these benefits by designing a business system within the value chain that is different from that of supermarket chains in several key respects: smaller stores, more store locations, and narrower product line. Its approach is higher cost than that of supermarket chains, so 7-Eleven must ordinarily charge higher prices to achieve. Apart from that, any potential causes of increased buyer value represent an opportunity to engage in a differentiation strategy. Again, buyer value can be increased through several approaches such as lowering the buyer’s cost of using the product, increasing buyer satisfaction with the product, and modifying the buyer’s perception of value. However, a distinctive product or service that lowers buyer’s direct costs can certainly increase their level of satisfaction as well. Collectively speaking, to increase buyers value on any aspect normally refers to the need to reconfigure or to improve other activities within the firm’s value chain.

Strong coordination among functions in R&D, product development, & marketing

In almost all differentiation strategies, the essence of the attention to product quality and service provides a dominant value to all routes for firms to build competitive advantage. For instance, firms may improve its product quality or performance wise to make it more unique in the customer’s eyes, as Lexus does with its sleek line of automobiles or Tiffany & Company does with its broad line of jewellery and gift items. The product or service can also embody a unique characteristic in its design or offering that is hard to imitate. In return, this provides the business an image of unique quality; as with Krups coffee and espresso makers or with American Express in travel services and charge cards. Besides that, other areas to focus on is the after-sales service, convenience, and the given quality is vital to achieve differentiation for numerous firms, such as for IBM in computer and electronic commerce technology or Hewlert-Packard (HP) in desktop printers and digital imaging technologies.

Another key aspect area a company has to constantly look out for is their existence of the current product development. Product development involves the considerable alteration of the existing products or either by introducing new but related products that can be marketed to meet current demands customers through established channels. A clear example of this is the aircraft manufacturer Airbus’s which provide products ranging from wider fuselage and cockpits. These products are designed as part where various aircraft and electrical industry can use them compared focusing on just one product, which is the mechanical flight controls.

These incredible features have helped Airbus attain its customers from across the country such as New York-based Jet blue. As a result, this may create a platform to achieve a distinctive competitive advantage which drives the firm to invest more in its R&D, matchless designs and character. Another example is Apple which sells a wide range of electronic devices such as iPhone, iPad, iPod line-ups. Both, R&D and marketing are part of the new product development process, whereby the focus of marketing is related to building and maintaining relationships with customers and analysing market changes and trends. R&D, on the other hand, has to provide the product solution and technical support throughout the process of new product development for the near future.

Corporate reputation for quality and innovation

A good marketing approach needs proper communication channel that creates positive viral patterns throughout the nation. In addition, company who wishes to stay successful in the marketplace should always hold its brand power at the top to attain the loyalty of consumers. A simple perfect example is Rolex one of the world’s top watch makers till today does not market any “limited edition” as it relies purely on sponsorship attitude at its best. This particular company relies heavily on continuous usage of advertising nationwide. One of the business strategies is by offering low discount to sale new piece and unsurpassed resale value. As a result, it helps the company to sustain itself in the market. Another way to put it is that the famous watch maker gets to achieve a very good resale value. This sets a good marketing strategy. Over the years, Rolex have managed to set up the art marketing strategy that is efficient enough to create desire without the help of the magic formula. The trick behind all is to have the right potential ambassadors for its advertising campaign. This helps the product to sell by itself. The key of having the right ambassadors needs to create a heroic impact, able to establish desire of others, achieving something unique, being different, bringing something fresh, charismatic, and successfully reaching out to buyers emotionally.

Continuous innovation plays a vital role in case of differentiation, as is exemplified by companies like Rolex. The company have been introducing a wide range of products over the years. In fact, the company is famous for its history. The company were known by making famous wristlet watches for the ladies and soon started to evolve in 19th century, soldiers found the advantage wearing them during wartime. And pocket watches were claim to be tedious to carry and hard to use during combat. As according to John E.Brozek writers on QualityTyme.net include that a spontaneous testimonial that was carried out in 1901 mentions that “… I wore it continually in South Africa on my wrist for 3 ½ months. It kept most excellent time, and never failed me.-Faithfully yours, Capt. North Staffs. Regt.”

This testimonial is shown below from an ad regarding a military pocket watch scheduled as The Company’s “Service” Watch, which further describes it as was the most dependable timekeeper back in the old days of World for Gentlemen going on an Active Service or for casual wear.

Over the years, Rolex has become reputable in the eyes of the public in its watches produced were suitable for the extremes of deep-sea diving, aviation and mountain climbing. And to carry out such distinctive attempt to sell the new Oyster watch. Wilsdorf hired a young London typist named Mercedes Glietz who is known to be as the prior lady whom swims in the English Channel. And in 1927, prior to Glietz’ in the 2nd attempt to swim the Channel, the founder of Rolex Wilsdorf publically announced that the new water-proof Rolex Oyster will be worn by her. And this was something which had never been previously accomplished by anyone. Although Miss Glietz did not entirely succeed in her 2nd attempt in crossing, she mentioned that the watch had still performed wonderfully. Thus, both she and the Rolex Oyster made everyone talking about it which in return, made it headline news around the world.

Till today, Rolex has continuously form creative advertising partnerships with athletes and athletic events. They are the official timekeeper of the Wimbledon and Australian Open tennis tournaments, and the Americas Cup yacht races, just to name a few.

Rolex Innovations:

Rolex has made many important contributions to the field of horology. Some key innovations are:

• The first truly waterproof watch (Rolex Oyster, 1926).

• The first “auto-rotor” self-winding watch (1932).

• The first wristwatch with an automatically changing date on the dial (Rolex Datejust, 1945).

• The first wristwatch with an automatically changing day and date on the dial (Rolex Day-Date).

• The first wristwatch case waterproof to 100m (330ft) (Rolex Oyster Perpetual Submariner, 1953).

• The first wristwatch to show two time zones at once (Rolex GMT Master, 1954).

• The first watch manufacturer to earn chronometer certification for a wristwatch.

And through many quality improvements Rolex integrates itself a step ahead by further enchasing its product development. And by far, Rolex now holds an ideal number of records for the most certified chronometer movements in the category of wristwatches. Rolex also participated in the development of the original quartz watch movement. Even though, Rolex produced a minimal amount of battery-powered quartz models, the company’s engineers were instrumental in design and implementation of the technology during the early 1970s which qualifies Rolex as one of the most innovative and successful companies in its industry

Amenities to attract highly skilled labor, scientist, and creative people

According to a recent issue of Fortune magazine states that Google an American multinational corporation is the best place to work in America. With Google now having nearing 10,700 full-time employees, it has yet managed to sustain its No. 1 status of having broad array of amenities that is being offered to its employees. It has developed in such as way that it has a high reputation for doing the unusual. Steven E. Gross, global leader of the broad-based rewards consulting business at Mercer Human Resource Consulting, mentions that Google, with its huge range of benefits, is trying to differentiate itself from other companies that want to hire people with the same capabilities. He further highlights that, these companies too have been increasing their employee benefits in recent years. “It’s all about the employment brand,” Gross says. Besides, Diva Sirota co-author of The Enthusiastic Employee: How Companies Profit by Giving Workers What They Want emphasises that, a company will suffer internally if its management views employees as costs rather than assets, if they are treated disrespectfully and if they are poorly compensated in salary and benefits. Until today, the company hires and retain people who are smart and determined, and they favour ability over experience. It’s really the people that make Google the kind of company it is. Apart from that the company strives to maintain an open culture often associated with start-ups, in which everyone is a hands-on contributor and feels comfortable sharing ideas and opinions. Google’s offices and cafes are designed in a way to help encourage communications between Googlers (employees) within and across teams, and to motivate conversation about work as well as play. And this had made them listed on the top 10 coolest place to work at.

Some personnel skilled in sales and operations- technical and marketing

Although differentiation can be achieved through a differentiated product, superior quality, and customer service etc. A key question is to ask whether the customers of the company perceive the point of difference as one that is worth to pay the subjected premium price. The focal point for the company pursuing a differentiation strategy should be the customer. To be said again, for a differentiation strategy to be successful, the point of differentiation perceived by customers as valuable should correspond with the distinctive competence of the company (Pearson, 1999). For instance, Orange a French multinational telecommunication corporation has manage to attain its desired sales by providing the most basic and yet better requirements for mobile phone communication as compared to its competitors. As a result, the company has formed a differentiation in the minds of its consumers. With its well-coordinated sales and operation working together the company has manage to tackle the market by simply providing its customers with mobile phone communication requirements like better network coverage, network reliability, and charging customers for only what they use, instead of features like free phone calls, which even have a higher cost for provider (Barwise et al, 2004). Thus, this evidently supports the whole statement of a company being distinctive in becoming customer-focused. However this strategy should be implemented with a clear vision which in return helps benefit the company in many ways including allowing the company to set its own price to a premium, gaining brand loyalty and sometimes even reducing costs. In short, for a company to effectively maintain a differentiation strategy, the firm should have a strong set of skills in its R&D, product engineering, keeping track of its business management, getting proper skills or well suited team players in sales and technical operations, advertising, and HRM. The information above was based on the findings of a study done by Hall (1980) which intends to investigate sixty-four American companies who practices a differentiation strategy had greater performance compared to those companies who does not. 

C. Examples of Ways Business Achieve Competitive Advantage

Technology Development

Technology development can be considered as kaizen, a continuous improvement from time to time. By having a unique and hard to imitate technology, a company can ensure longer sustainability. This can be clearly seen in Honda, they will continuously put in effort to execute technology research for a distinct product feature. At Honda, their three main objectives they hold on until now are “high efficiency, high intelligence, and clean energy” (Honda Worldwide Cite, 2012). Honda is also up to the challenge to go beyond cars. Honda has been exploring many technology alternatives such as Asimo (the humanoid robot). Asimo had gained attention all around the world with its intelligence and physical capabilities. For instance, Asimo were able to prevent collision while walking, detect words, kicking a ball, and hopping on one leg (Honda Worldwide Cite, 2012). Furthermore Honda came out with the idea of walking assist, this benefit for people with weakened muscles. Other interesting product technology that differentiates them from other competitors was the motorcycle airbag system. This technology had greatly helped in reducing accidents and severe injuries for the rider (Honda Worldwide Cite, 2012). Worth to include also was their remarkable Hybrid vehicle in which they still progressing to expand its hybrid line up. The latest Fit Hybrid that was launched had offered excellent fuel economy and enjoyable driving fulfilment (Honda Worldwide Cite, 2012). They had indeed achieved tremendous success from its very innovative products.

Human Resource Management

Human capitals are assets that are priceless. Thus it is very critical to retain the bright, talented and quality people that it needs for consistent success. As for International Business Machines (IBM), their basic core values will be “respect for the individual, for his rights and dignity” according to the chairman, Thomas J. Watson. Many programs and policies that had been implemented to demonstrate this core values, these include “Open Door Policy”, the “Speak Up” programme, the intranet, routine bulletin announcement board and the intensive employee opinion surveys (International Business Machines, n.d.). Practices that are well used in the company make IBM one of the well-known companies world-wide. In addition, IBM has become the first employer who applies work/life balance and invested $50 million global fund to support work/life programs (International Business Machines, n.d.). This shows how dedicated IBM in taking care of their employees. This indirectly differentiates IBM with other companies like Intel for instance. Furthermore, IBM provides three types of e-learning that will help their employee’s competency in the work place. Among them are basic blue, one voice and coaching simulator (International Business Machines, n.d.). Basic blue is especially for first time managers that includes distributed learning and classroom based experience for a period of one year. On the other hand, one voice is employee orientation programmes for disseminating technologies knowledge. Lastly is the coaching simulator whereby it will help to guide in various challenging management conditions via web-based tools. Hence, IBM is a great example for human resource management to achieve competitive advantage thru differentiation.

General Administration

General Administration is paramount in each and every company in the world. Great administration will contribute to a company’s success in long terms. Take as an example, the Coca Cola Company; the company had been in the soft drink industry for more than 56 years and still standing strong. The major brand of Coca Cola includes Fanta, Sprite, Diet Coke and Coke Classic, to mention a few. In terms of general administration, we can see that Coca Cola Company provides excellent vending machines services. Not only has that, it provided hassle-free service to the customers whereby the company will prepare all the customers need. Among the needs fulfilled are an account manager to ensure a customised service, a local Vending Sales Rep (VSR) to consistently filled and cleaned the vending machines as well as committed vending audit members who will regularly check for its quality (Coca‑Cola Enterprises Ltd, n.d.). In addition to that, Coca Cola Company accommodates a customer service centre for the convenience of its vendors and customers. Moreover, to run the administration smoothly, the company cater a website just for emergency cases like breakdowns. Besides that, the Coca Cola Company administer expertise teams for repairs and maintenance sufficiently. Hence it is undeniable that Coca Cola Company had done tremendously a good job in managing its general administration.

Procurement

Business can gain competitive advantage through differentiation by how a company manage its procurement. Procurement is a progress of sourcing and purchasing items or services from external suppliers. Procurement is essential in ensuring that the process goes smoothly while the messages had been communicated effectively to the suppliers. The Ikea Group of Companies, an international retailer of household good and furniture, has 150 stores all around the world (International Institute for Sustainable Development, 2012). The source of raw materials came from approximately 50 countries especially, China, Germany, Italy, Sweden as well as Poland. A ‘code of conduct’ had been launched in September 2000 which emphasized on legal aspects, operative ambience as well as environmental circumstances. As for legal aspects, national laws and regulations regarding child labour, environment protection and working conditions must be followed by suppliers. Furthermore, Ikea expects suppliers to provide safe working environment and to treat their employees fairly. Finally Ikea also stresses on environment protection whereby suppliers are expected to minimize potential damaging activities to the surrounding. Suppliers are expected to dispose in a safely manner, decrease waste to the air, water or even ground as well as practising recycle of used items.

Supply Chain

The idea of supply chain by Michael Porter helps most of the top companies in doing business. Yves Carcelle who is the brand’s chief executive officer of Louis Vuitton (LV) mentioned in one of his interview by saying ‘Behind the creative magic of Louis Vuitton is an extremely efficient supply chain’. It is not a surprise LV is doing well since 1854 up until now. In supply chain there are two types, primary activities and supporting activities. Primary activities consist of inbound logistics, operations, outbound logistics, marketing and sales and lastly services (The Wall Street Journal Online, 2006).

Inbound logistics refer to all the activities involve in receiving raw materials and how well the company handles the inventory. Example for this will be Zara. Zara is one of the renowned companies with their wide range of clothing from women to kids wear. Inditex is the company who is responsible for Zara’s successful. Zara is not only distinguishing for its frequently new products in store but they are also acknowledging for their top quality product. But how does Inditex manage to keep all that and at the same time minimizing their cost? It starts with the designers where most of them design or sketch their design .Then they will send the design to the factory to produce. In order for the designer to design, they need to have some sort of ideas to design new style of clothing, which is why they need to work closely with store managers around the world. Store managers will keep up to date the sales, what type of clothes selling fast and what is not making any sales in the stores. After the design are done, they need to produce the clothes and send to the stores immediately by air shipments which can be costly than the other companies who produce in low cost countries like Asia. Due to quality concern, Inditex does not really mind paying for extra cost because of their excellent strategy of budgeting. According to Capell, they spent only 0.3 percent on advertising and focusing more on manufacturing. Moreover, Zara is a retail company that distributes, manufacture and produce their own product by their own factory. Due to Zara’s strategic location which is in Spain, Zara get benefits from of having good quality manufacturer in Europe. Due to Zar