Please use the 5 elements of strategy to describe how your proposed blue ocean strategy will be implemented. This will help the company to survive and minimize the risk, but if the company does not choose one of three competitive strategies, then there would be a loss of resources. Starbucks has made the organization well-known for tailoring to broad customers’ needs by preparing orders to meet customers’ wishes, no matter how detailed they are. If the achieved selling price can at least equal (o… advantages and disadvantages of differentiation strategy pdf. The traditional method to achieve this objective is to produce on a large scale which enables the business to exploit economies of scale. NRS 451VN Week 1 Assignment: Professional Resume and Cover Letter, NR510 Week 1: Barriers to Practice Discussion, Economic Growth and Education Level in China. By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry. These categories are: Starbucks employs a broad differentiation strategy. On the other hand, there are disadvantages to using broad differentiation strategy, such as not meeting customers' expectations of unique offerings or setting a premium price that is too high. Corporate level strategy implies the notion of creating value by deciding in which businesses a company may compete. Advantages and Disadvantages of Differentiation. This strategy is concentrated on a broader segment of the total market. There are several ways an organization can create a differentiation-based competitive advantage for a single product or the company as a whole. Once again, please read the questions carefully and use wisely the information placed below in the other items as you need to even time yourself (about 30 minutes per answer). a) Please provide a very detailed analysis of the Coca Cola company’s resources and capabilities. Required fields are marked *. Starbucks is also well known for quality products, with stringent guidelines outlining how their coffees are to be prepared, as detailed as espresso must be served within twenty-three seconds of brewing. As editors of the Wiley Encyclopedia of Management 3e, Vol. Cost Leadership and Differentiation. Posted October 11th, 2020. Q1. Businesses looking to build a broad or focused differentiation strategy will need to produce or design extremely unique or distinctive products or services that create increased value for the consumer. Advantages and Disadvantages of Product Differentiation. Advantages and disadvantages of Coca cola joint ventures for diversification. Schultz’s strategy is to keep Starbucks’ partners happy and passionate about their work through compensation, benefits, and company culture. Differentiation is the educational practice of modifying or adapting instruction, school materials, subject content, class projects, and assessment methods to better meet the needs of diverse learners. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. Remember, I have offered this set of essays for several years and I have been able to get a consistent perspective on what I am looking in the answers and with the rubric that I use, it is possible to assign a grade in about 10-15 minutes. Starbucks target market is large enough to offer continued growth potential and attractive profits. The product differentiation process may be as simple as redesigning of packaging to introducing a brand new functional feature in a product. Many consumers perceive the product as equivalent to alternative products offered in the marketplace at a lower price. Losing the perceived customer quality differentiation is devastating to this strategy. Then they cheerfully accept their strengths as differentiators. Advantages and disadvantages of Coca cola joint ventures to achieve diversification Order 100% Plagiarism Free Paper Now. They are able to hook customers with the quality and service provided in their coffee shops which leads to customers’ purchases of other Starbucks labeled items such as bottled coffees in grocery stores or Starbucks brand liqueur at the liquor store. The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments. Once determined, the strategy is categorized as one of the 5 Generic Competitive Strategies. 1. Advantages Of Product Differentiation. Below we illustrated a few examples in relation to an often differentiated product – women’s handbag. One of the main criticisms to the Resource Based View of the Firm is that companies cannot obtain sustainable competitive advantages because of competitor’s reactions and attacks that erode advantages depending on the market cycle [slow or fast] that the company is competing. The company must use only one out of three competitive strategies. Starbucks offers their partners the opportunity to purchase company stock through payroll deductions. Reference – Crafting & Executing Strategy by Thompson McGraw-Hill, 18th edition ISBN # 9780078112720, Your email address will not be published. Why is cost leadership potentially so important? b) Use the key criteria [rare, valuable, costly to imitate, and non-substitutable] to determine if Coca Cola has competitive parity or temporary competitive advantage in the soft drink industry. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). Cost leadershipimposes severe burdens on the firm to keep up its position, which means reinvesting in modern equipment, ruthlessly scrapping obsolete assets, avoiding product line proliferation and being alert for technological improvements. One weakness of using a differentiation strategy involves the challenge of changing the customer perception. I feel that you do not need more than this company information and your reading from the book to properly answer the questions. Q3. Companies can engage in diversification efforts by different means [mergers, acquisitions, joint ventures, strategic alliances, or international expansion]. Despite the stagnant growth in the industry, its leading brand, Coke, remains the market leader and it can be considere8i9d as a cash cow for the company. Then, by achieving the lowest possible cost, the leader can place their team or organization into a position where the lowest price in the market is charged for needed goods or services. Types of Strategies – Cost Leadership ,Differentiation , Focus. Q2. AVOID buying essays online or even googling for Coca Cola SWOT\’s or other blogs/strategic aspects as the worst thing that you can do is get a fail score in this comprehensive exam. I am providing the latest information from the Coca Cola Co. Starbucks has secured a competitive advantage with its unique, yet diversifying product offerings. The different factors on which the process is implemented include: 1. differentiation strategy A business strategy in which a company tries to gain a competitive advantage by providing a unique product or service, or providing a unique brand of customer service. Starbucks serves a market that is defined by coffee drinkers. Each generic strategy offers advantages that firms can potentially leverage to enjoy strong performance, as well as disadvantages that may damage their performance. Training programs must be comprehensive to support the customer service differentiation but can be expensive. Difficulty in the pricing of goods that are not new into the market. Broad differentiation is a strategy that is applied across an industry, appealing to a broad range of shoppers. The Cons of Differentiated Instruction. There could be small businesses or involved in a single business or a large, complex and diversified conglomerate with several different businesses. 2. Differentiation Strategy Prof. (Dr.) Nitin Zaware Prof. (Dr.) Nitin Zaware 1 2. Diversification is a form of corporate strategy designed to improve opportunities for growth and profitability. His expectations in return are to retain employees (reducing training and turnover expenses) and generate revenue (through customer satisfaction). Broad differentiation strategy for many companies often relies on strengths. https://www.coca-colacompany.com/company/coca-cola-system, https://investors.coca-colacompany.com/strategy, https://investors.coca-colacompany.com/financial-information. Cost declines with cumulative volume are by no means automatic, nor is reaping all available economies of scale achievable without significant attention. Differentiation strategies have … By definition, the differentiation strategy is focused on a higher margin, smaller market share. They are well-positioned in the market with a plentiful amount of easy to access stores. Pursuing a differentiation strategy requires a larger financial investment from the company, another weakness. There are essentially two factors that identify competitive strategies. Differentiation strategy 1. Once determined, the strategy is categorized as one of the 5 Generic Competitive Strategies. A firm must have strong marketing capabilities and effective quality assurance. To successfully employ this strategy, Starbucks provides differentiated quality and service in the coffee sales and shop industry while diversifying their offerings to include: a variety of coffee product sales outside their stores through partnership with PepsiCo, Starbucks brand liqueur through partnership with Jim Beam, food and merchandise sales, and other acquisitions such as Tazo tea. Other firms may out differentiate the existing firms by introducing better unique products into the market. The advantages and disadvantages of the cost leadership styles show us that this process can be used to create a unique competitive advantage. The big risk when using a differentiation strategy is that customers will not be willing to pay extra to obtain the unique features that a firm is trying to build its strategy around. Competitive Strategy is about applying offensive or alternatively defensive actions to create a advantageous position within marketplace, with a purpose to deal with issues effectively with competitive forces in addition to come up with a much better return on investment.. 3. A Cost Leader is where the company has … Q1.   In a differentiated classroom, teachers recognize that all students are different and require varied teaching methods to be successful. Your email address will not be published. The differentiation strategy is closel Focused cost leadership is the first of two focus strategies. Copyright © 2021 A+ Professional Essay Writing Services:- All rights reserved. Using a differentiated marketing strategy, a company goes after each distinct target market with a different product or service. As a product remains in the market for longer consumers become smarter about the prices and thus the premium charges being charged can no longer be sustained. Large companies strive to differentiate their cereal brand as a higher quality than cheaper cereals. Sara Lee’s Cookie Crumbles – 2 Business Units Survive, Starbucks – Pursues a Broad Differentiation Strategy. Product differentiation occurs on two clear levels: vertical and horizontal. Consider cereal. Please do the following, a) Discuss the advantages and disadvantages of all these different means to achieve diversification. b) Provide a summary of potential opportunities and threats to the Coca Cola Company as the current CEO will use your analysis to develop a new strategic management process for the company’s operations in the US. The goal is to produce goods or services at the lowest possible cost by organizing every potential resource around the current production methods. Product differentiation means that your product has one or more distinct attributes that separate it from competitors. Competitive Advantage cannot be fully understood by considering an organisation in general. Buyer loyalty is … Below are the disadvantages or risks of the broad differentiation strategy: Differentiating on an unimportant product feature that doesn't result in providing the best value to the customer; Too much differentiating the product like products' features exceed the customers’ needs; The focus strategy is one of three generic strategies that Professor Porter created at the time: cost leadership, focus, and differentiation. Examples of Firms Pursuing a Differentiation Strategy ... strategy means that a firm is competing based on uniqueness rather than price and is seeking to attract a broad market (Porter, 1980). The Coca Cola Company has been using a broad differentiation strategy to compete in the American soft drink industry for the last decades. Advantages and disadvantages of Coca cola joint ventures for diversification. Cost Leader. As mentioned above, Porter suggested either of the three strategies to survive in a competitive business. The corporate strategy in these cases is about the basic direction of the firm as a whole. A focused cost leadership strategy requires Figure 5.10 image description: Executing a Differentiation Strategy. Broad Differentiation Strategy . With this strategy, the objective is to become the lowest-cost producer in the industry. The Disadvantages of Differentiated Marketing. In 2007, department store Dillard’s stopped carrying men’s sportswear made by Nautica because the seafaring theme of Nautica’s brand had lost much of its cache among many men. Tougher Work Load for Teachers Working with each individual according to his learning style means more work for the teacher, more time taken for each lesson and each child. Many (perhaps all) market segments in the industry are supplied with the emphasis placed on minimising costs. Additionally, a differentiation strategy relies on effective and productive human resources. All of the six strategies designed by porter enlists the interaction between pr… Cost leadership styles focus on resource organization. Some of thes… Coleman camping equipment offers a good example. These categories are: Starbucks employs a broad differentiation strategy. These are the target market (broad or narrow) and competitive advantage (low cost or differentiated). Each generic strategy offers advantages that firms can potentially leverage to enhance their success as well as disadvantages that may undermine their success. Based on this information. Most famously, Starbucks offers all part-time employees that work at least twenty hours health insurance benefits, a benefit implemented by CEO Howard Schultz who watched his father struggle as an employee of companies that did not offer such benefits. Cost leadership strategyis vulnerable to the risks, such as relying on scale or experience as entry barriers. The idea here is simple. In this post I’m going to be focusing on differentiation, but it is important to understand why differentiation is a strategy and how it relates to competitive advantage. The Coca Cola Company has been using a broad differentiation strategy to compete in the American soft drink industry for the last decades. They have done the trusty old SWOT analysis and listed their strengths and weaknesses. Q4. b) Choose the most appropriate one to recommend for the Coca Cola Company. A strategy directed toward creating something that is perceived as being unique. A broad differentiation strategy: Trying to differentiate different ways of delivering company products from competitors that will appeal to a wider range of customers [Some examples are Nordstrom (known for customer service policies and staff) and Whole Foods (emphasis on health foods and organic groceries) Perhaps Starbucks most impactful strategy is the time, effort, and financial resources that are invested into its employees – or partners as Starbucks has eliminated the word employees from its vocabulary. Product differentiation is economically advantageous to a company. Starbucks strategy, combined with its unwillingness to compromise quality in any circumstances and passionate leadership under the direction of Howard Schultz, CEO, has Starbucks well positioned to remain profitable and a leader in this market niche. broad across-the-board: broad in scope or content; "across-the-board pay increases"; "an all-embracing definition";… This strategy is concentrated on a broader segment of the total market. A differentiation strategy offers important advantages and disadvantages for firms that adopt it. They accommodate what their buyers view as valuable and are able to create demand at a profitable price. Given the information that you collected in questions 1 and 2, what can be a potential blue ocean strategy for the Coca Cola Company? Vertical differentiation refers to products that fall on a scale from best to worst, highest to lowest, impacting the overall functionality of the item. 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