Differentiation Strategy

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DIFFERENTIATION STRATEGY

In this paper work we will talk about Differentiation Strategy. In contrast to the cost leadership strategy, implementation of a differentiation strategy means that value is provided to customers through the unique features and characteristics of a company's products rather than by the lowest price. Because differentiated products satisfy customers' unique needs or preferences, companies can charge premium prices for differentiated products.  For the company to be able to outperform its competitors and earn above-average returns, the price charged for the differentiated product must exceed the cost of differentiation.  In other words, the price charged must exceed total product cost. Because of this, the differentiated product's premium prices generally exceed the low price of the standard product.  Companies that follow a differentiation strategy concentrate or focus on product innovation and developing product features that customers value rather than on maintaining the lowest competitive price (as is the case for the cost leadership strategy).

Products can be differentiated in a number of ways so that they stand apart from standardised products: superior quality
unusual or unique features
more responsive customer service
rapid product innovation
advanced technological features
engineering design
additional features
an image of prestige or status
 
For example Intel uses speed, innovation, and manufacturing techniques as bases of uniqueness. The company's focus throughout its primary and secondary value-creating activities is on establishing the importance of quality, accuracy, speed, and responsiveness. The focus is also on understanding and meeting customers' unique preferences and monitoring the speed, reliability, and quality of activities provided by others that interface with the company's inbound and outbound logistics.  

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