Different Theories And Models That Argue For Or Against Differentiation

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The literature review will discuss the different theories and models that argue for or against differentiation as a means to achieve a competitive advantage. Both will be introduced as they will be the framework for the dissertation. There will also be an introduction to the scooter industry in Spain. Introduction to the concept of differentiation as a competitive advantage. From the firm 's point of view it is very important to acknowledge the industry in which it competes, to quote Porter, the industry is the "arena" where competition takes place. Industries are comprised of firms that produce similar products and services making them competitors. The firm’s competitive environment has a common structure that consists of five competitive…show more content…
Porter (1980) argues that the competitive advantage is a process that requires constant realignment to adjust to the changing environment. There are three different strategies that a firm can adopt to achieve a competitive advantage: • Cost Leadership: A firm aims to produce at a lower cost than the competition. This is usually achieved by economies of scale. • Differentiation: When a firm seeks to be unique in one or more dimension that are valued by the consumers by producing products that are different from the competition This depends on the industry and of the products themselves but usually will involve features, functionality, durability, support and a brand image. The success of a generic differentiations strategy depends on good research, the ability to deliver a high quality offering and effective marketing so the market understands the benefits associated to the unique offering. • Focus: Depending on weather the firm decides to take a narrow or broad approach to cost leadership or differentiation will lead to focus. It occurs when a firm aims to be the best in a segment or group of segments by understanding the special needs of a niche segment. Focus is usually not enough on its own, a cost leadership or differentiation strategy will have to support it. Saloner, et al. (2005) found that there are three different ways to structure a differentiation strategy: • A firm can target product or service attributes by focusing on the features of

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