Differentiation Strategy
In the initial stages of crafting a strategy, company managers have to decide which of the five basic competitive strategies to employ—overall low-cost, broad differentiation, focused low-cost, focused differentiation, or best-cost provider.
Broad differentiation strategies seek to produce a competitive edge by incorporating attributes and features that set a company's product/service offering apart from rivals in ways that buyers consider valuable and worth paying for. Successful differentiation allows a firm to (1) command a premium price for its product, (2) increase unit sales (because additional buyers are won over by the differentiating features), and/or (3) gain buyer loyalty to its brand (because some buyers are strongly attracted to the differentiating features and bond with the company and its products). Differentiation strategies work best in markets with diverse buyer preferences where there are big windows of opportunity to strongly differentiate a company's product offering from those of rival brands, in situations where few other rivals are pursuing a similar differentiation approach, and in circumstances where technological change is fast-paced and competition centers on rapidly evolving product features. A differentiation strategy is doomed when competitors are able to quickly copy most or all of the appealing product attributes a company comes up with, when a company's differentiation efforts meet with a ho-hum or so-what market reception, or when a company erodes profitability by overspending on efforts to differentiate its product offering.
Answer the assignment questions for this exercise after reading about Broad Differentiation Strategies in Chapter 5 and exploring Airstream’s website at www.airstream.com. The exercise should help you gain command of the major avenues for achieving a competitive advantage based on differentiation and see if you can identify at least three ways in which the company seeks to differentiate itself from rival recreational vehicles. Is there reason to believe that Airstream’s differentiation strategy has been successful in producing a competitive advantage? Why or why not?
1. Identify at least three ways in which the company seeks to differentiate itself from rival recreational vehicle manufacturers.
2. Is there reason to believe that Airstream’s differentiation strategy has been successful in producing a competitive advantage? Why or why not?