Which is a risk of pursuing a differentiation strategy? A wide difference in cos
ID: 349673 • Letter: W
Question
Which is a risk of pursuing a differentiation strategy?
A wide difference in cost between differentiated and undifferentiated products
Absolutely no difference in cost between differentiated and undifferentiated products
A small difference in cost between differentiated and undifferentiated products
None of the above
A.A wide difference in cost between differentiated and undifferentiated products
B.Absolutely no difference in cost between differentiated and undifferentiated products
C.A small difference in cost between differentiated and undifferentiated products
D.None of the above
Explanation / Answer
Differentiation relies on the concept that customers will pay more for an item if they perceive that it is different and if the basic for the difference is valued by the customer.
Differentiation involves achieving competitive advantage through pinpointing product or service attributes that customers perceive as valuable and positioning the firm to meet those demands betters than the competition. Differentiation has several potential advantages:
Focus is essentially a strategy of segmenting markets. The segment sought may be defined by a particular buyer group, a geographic market segment, or a certain part of the product line. The logic of this approach is that a firm that limits its attention to one or a few market segments can serve those segments better than firms that seek to influence the entire market
The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost reduction are not unique to you, and that other competitors copy your cost reduction strategies. This is why it's important to continuously find ways of reducing every cost. One successful way of doing this is by adopting the Japanese Kaizen philosophy of "continuous improvement."
Differentiation involves making your products or services different from and more attractive than those of your competitors. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support, and also brand image that your customers value.
To make a success of a Differentiation strategy, organizations need:
Large organizations pursuing a differentiation strategy need to stay agile with their new product development processes. Otherwise, they risk attack on several fronts by competitors pursuing Focus Differentiation strategies in different market segments.
Fundamentally, the risks is pursuing the generic strategies are two:
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