Business Level Strategy: Product Diversification. Learning Objectives:
Understand the bases of product differentiation and which might lead to competitive advantage; organizing to support product differentiation; pitfalls of adopting this business-level strategy; whether cost leadership and product differentiation can be simultaneously implemented; strategy implications of industry life-cycle.
…strategies available to any firm to achieve competitive advantage…
How does a product differentiation strategy neutralize the following treats?
Threat of Entry
Threat of Rivalry
Threat of Substitutes
Threat of Buyers
Threat of SuppliersProduct Differentiation and VRIO Framework
Which ones are valuable? Rare? Costly to duplicate?
Can firms succeed implementing both strategies ?
Product differentiation leads to increased sales, which lead to economies of scale, learning and other cost reductions
Empirical research supports dual strategies
Porter has backed off the “stuck in the middle” argument
Requires different organizational structures
Management control systems differ
Differences in compensation policy designImplementing Both Cost Leadership andProduct Differentiation Strategies
Determinants of success may differ depending on the stage of industry life-cycle
Newly formed – innovations,
changes in demand, needs
Rapid increases in capacity and
unit sales, dominant technology
Slowing growth rate, increased
Consistent decline in unit sales,
What does it take to succeed in the
Introduction / Emerging stage?
What does it take to succeed in the growth stage?
What does it take to succeed in the mature stage?
What does it take to succeed in the declining stage?