Large companies usually adopt this kind of strategy-Broad differentiation when the competition gets tough. Broad differentiation is a kind of differentiation that range from products to services. According to Michael Porter, in order to avoid being “stuck in the middle” company should select one strategy out of three generic strategies (Cost Leadership, Differentiation and Focus) which he had mentioned in his book, Competitive Strategy.
Why a company needs to differentiate?
“Differentiation is a unique quality, perceived or real, of a good or service that distinguish it from a competing good or service..." -Your Dictionary.com-
The need to be distinctive and competitive are the reasons why the company needs to differentiate their products or services. Broad Differentiation Strategy is common in big firms that want to maintain and cover the whole market in the business world. The catch in differentiating a product and or services are:
- a.) the company could set premium price of the product/services; and
- b.) increase sales and gain loyalty from the consumers or customers because what they offer is unique thus, gave value to their money.
- The differentiation would act as a barrier to the business entrants;
- The company could set a higher price to suppliers; and
- Reducing the bargaining power of the buyer because differentiated products can’t be easily copied.
When you differentiate products/services in a broad differentiation strategy, It doesn't mean you should focus on one brand for the entire market segment but also thinking and producing differentiated products that would fit to each market segment.
DRAWBACKS OF BROAD DIFFERENTIATION
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;
- Charging a price premium that buyers perceive as too high;
- Ignoring a need to signal value; and
- Not identifying what customers consider valuable.
Whatever the economic conditions that the market would experience the company with differentiated products could still survive and flourish. We have to remember that bad economic condition to some company is an opportunity for growth. Therefore, the company’s long existence is dependent on the strategy they implemented, which are proven and tested.
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Jess on September 18, 2016:
Double thumbs up for this article !
CompassAdvisor from Charlotte, NC on September 10, 2012:
dwarfstar (author) from California on April 03, 2012:
Thanks mike for the comment