Importance of Differentiation for Low Cost Competitors

This essay discusses the importance of differentiation for low cost competitors in gaining competitive advantages. Real world examples are used to illustrate the effectiveness of differentiation strategy.

Running head: GLOBAL STRATEGY
Global strategy
Name of the student
Name of the university
Author note

1GLOBAL STRATEGY
Answer: 1
Introduction
In the current business scenario, it is important for the business organizations to
determine the industry competitiveness where they are operating. This is due to the reason that
intensity of the competitiveness in the industry will determine the viability of the businesses
along with the long term profitability (Yunna & Yisheng, 2014). In this case, six forces model is
one of the most effective and applicable models to be used for determination of the industry
competitiveness. This is due to the reason that six forces consider the major forces in the market.
However, on the other hand, there are number of criticisms also being emerged against this
model. This paper will discuss about the advantages and disadvantages of using six forces model
for the business organizations. Real world examples will be used to determine its effectiveness
(Dobbs, 2014).
Advantages of six forces model
One of the major advantages of using six forces model is the considerations of the major
competitive factors such as the impact of the buyers, suppliers and substitute products.
Irrespective of the business sectors, these factors are relevant and thus six forces model can be
implemented by any business organization in any situations (Mathooko & Ogutu, 2015). This
denotes the flexibility of this model and it can be termed as one of the major advantages of six
forces model. Another major advantage of using this model is consideration of the
complementary products. This is due to the fact that impact of the complementary products is not
being generally considered by the business organizations but in the current competitive business
scenario, each and every product in the market are having substitute products in the market.

2GLOBAL STRATEGY
Thus, with the help of this model, business organizations will be able to identify the intensity of
the substitute products also.
Disadvantages of six forces model
Apart from the advantages that are to be gained by the business organizations by using
six forces model, there are number of disadvantages also being identified. One of the major
disadvantages of six forces model is the lower adherence of this model with that of the changing
business environment (Jarzabkowski & Kaplan, 2015). This is due to the reason that in the
current business state of affairs, competition is much higher and different business factors are
changing and evolving rapidly. However, the factors considered in this model are assumed as
constant. Thus, the business organizations will face the difficulty in aligning this model with that
of changing business factors. Another major disadvantage being identified is the non-
consideration of the non-market forces. This is also important due to the reason that non-market
factors such as the weather and climate are having major influences on the business viability.
Thus, the business organizations vulnerable to the extreme weather conditions will face
difficulties in using this model (Skokan, Pawliczek & Piszczur, 2013). This is can be termed as
another disadvantage of the six forces model.
There are number of markets where the intensity of the competition is lower and
substitute products are not having higher intensity. In this case, this model will not be applicable
due to the reason that six forces model is depended on the competing factors. In the current
business state of affairs, defining the industry is one of the major challenges due to the reason
that number of sub-industries are having emerged in the market. However, using the six forces
model will involve proper definition of the industry (Srivastava, Franklin & Martinette, 2013).

3GLOBAL STRATEGY
Thus, it can be concluded that six forces model is not applicable in the case of contemporary
businesses. Technology is one of the major determining factors in the recent time for the
business competitiveness. However, six forces model do not involve technological factor. Hence,
the identification of the competitiveness with the help of this model is not proper and effective.
For instance, Apple is one of the major electronic brands in the world and the following
section will discuss about the six forces analysis on Apple.
Bargaining power of the buyers  Apple is having high bargaining power of the buyers.
This is due to the reason that number of brands is
operating in the market.
 Preference pattern of the customers determine the
pricing decisions of Apple.
Bargaining power of the
suppliers
 Suppliers are having higher bargaining power over
Apple.
 Apple is depended on different component suppliers for
their products.
Threat of new entrants  Threat of new entrants is low for Apple.
 This is due to the reason that huge investment is
required for entering in this sector.
Threat of substitutes  Threat of substitute is high for Apple due to the
presence of number of competitors.
 Different brands are offering almost similar
experiences.
Competitive rivalry  Competitive rivalry is high for Apple.

4GLOBAL STRATEGY
 Price discounts are frequently being offered to attract
more customers.
Complementary products  Impact of complementary products on Apple is low.
 Products of Apple are less depended on external items.
Conclusion
Thus it can be concluded that six forces model is one of the most effective and suitable
models in determining the industry competitiveness for the business organizations. This essay
identified some of the major advantages and disadvantage of using this model.
Answer: 2
Innovation is one of the major factors being considered by the contemporary business
organizations in gaining competitive advantages. This is due to the reason that innovation helps
the business organizations in having unique and distinctive approach in the market. Thus, the
competitive advantages in the form of differentiation can be further get enhanced with the help
of the innovation (Volberda, Van Den Bosch & Heij, 2013). However, it should also be noted
that there are different types of innovation being initiated by the business organizations in
accordance to their external situations. Each of the types of the innovation is having different sets
of utilities. The following sections will discuss these innovation types along the companies
following those.
Proactive innovation

5GLOBAL STRATEGY
One of most popular strategic innovations being followed by the contemporary business
organizations is proactive innovation. This refers to the development of strong research
infrastructure in the firm and gaining the early mover advantage in the market. In this case,
support of the strong research and development aspects of the companies helps in creating new
market segments (Ryszko, 2016). For instance, Apple is the one of the prime examples of
proactive innovation due to the reason that even though the products being sold by Apple are
having number of substitutes in the market, but their innovative features helps them in standing
out in the market. Apple is having huge investment in research and development and it is helping
them in offering innovative features to the customers. It is also helping Apple in fending off the
competition by having the early mover advantage.
Active innovation
Active innovation is more defensive approach compared to the proactive innovation
strategy. This is due to the reason that in this case, companies do not initiate the radical change
or innovation in the market not they are having the early mover advantage. With the help of the
active innovation, companies stay with their existing technologies but also being prepared about
the change in the market (Meissner & Kotsemir, 2016). Thus, the success of the innovation is
more as it is being initiated after determining the market for it. For instance, Microsoft is
following the active innovation strategy by sticking to their windows operating systems. From
the initial stage till now, the systems and interface of the windows operating system is same with
the change in the different elements according to the change in the market trends and
requirements.
Reactive innovation

6GLOBAL STRATEGY
Reactive innovation is another defensive approach even compared to the active
innovation strategy. This refers to the strategy of following the early movers in the market and
implements their strategy only if the early movers prove successful. In the case, the risks are
much lower due to the reason that implemented innovation is already proven by others (Adams,
2016). For instance, Chinese mobile vendors such as Huawei and Lenovo are acting as the
reactive innovators to the brands such as Apple and Samsung. This is due to the reason that there
are number of innovative features being offered by Apple are being successfully copied by these
brands and got further success in the market. The upper notch in the mobile screen was first
introduced in the market by Apple and after it caught the attention in the market, more Chinese
vendors came up with the same notch in their models. This helps to tap the positive vibe of the
customers with the notch.
Passive innovation
Passive innovation refers to the strategy of not initiating the change before the customers
are demanding for it. Thus, in this case, innovation is not being initiated by the businesses rather
they follow the same approach till the time, customers are demanding new features. In this case
also, the level of risk is less as the business organizations are being able to initiate the innovation
only after the market is ready to accept. For instance, automotive brands follow the passive
innovation (Heidenreich & Speith, 2013). This is due to the reason that affordable carmakers will
offer features such as sunroof only if the target customers are demanding for the same. It is being
identified that concept of sunroof was introduced in the market few years ago but still there are
number of automotive brands, which are not offering this feature till the time, their targeted
customers demand.

7GLOBAL STRATEGY
Conclusion
Thus it can be concluded that there are different types of innovation strategies being
followed by different organizations according to their situations. In this paper, the major four
types of strategic innovation are being discussed. A few real world examples are also being used
to determine the effectiveness of these strategic innovation types. It is identified that based on the
risk taking ability of the business organizations, different types of innovation are being initiated.
Answer: 3
Introduction
It is important for the contemporary business organizations to have different sources of
gaining competitive advantages. This is due to the reason that competitive advantages will help
the business organizations in gaining the upper hand in the competition and can stay ahead over
others. One of the major sources of gaining competitive advantages is the cost leadership by
offering the products and services in minimal price possible (Banker, Mashruwala & Tripathy,
2014). However, this is not applicable across all the business organizations especially for the low
cost organizations. This is due to the fact that they are already offering products in lower price.
In this case, the most effective strategy of gaining competitive advantages will be differentiation.
The following sections will discuss about the importance of differentiation for the low cost
entities with the help of real world examples.
Discussion
Differentiation is important for the low cost competitors due to the reason that the
provision of cost leadership cannot be initiated by them. In addition, according to porter generic

8GLOBAL STRATEGY
strategies, market focus will also not be applicable for the low cost competitors as majority of the
mass market players caters to extended customers segments (Zehir, Can & Karaboga, 2015).
Thus, in this case, differentiation strategy should only be used due to the reason that it will help
the low cost competitors in gaining distinctiveness in the market in the same price level they are
operating. For instance, Hyundai and Suzuki are both offering small and affordable cars in the
market in the same price levels with having almost same level of features. However, there are
still number of differences being followed by both the organizations such as the external looks.
Carss in the same price level of both Hyundai and Suzuki look different and it is helping them in
targeting the customers with their distinctive product (Ray Gehani, 2013). It is proving that
differentiation is important for the low cost competitors in gaining the competition.
Another major reason of using the differentiated strategy is fending off competition. This
is due to the reason that level of competition is very much high in any affordable business sectors
and in this case, differentiation strategy will help in staying ahead of the competition. For
instance, majority of the Android powered smartphones being offered by different brands are
same in software and other features with mere differences in branding and designs. The user
experience and value propositions for each of these products are also same (Rong, Hongshan &
Jiang, 2013). Thus, without the differences, customers will not have any loyalty towards a
particular brands and the entire smartphones sector will be seen as generic product offerings. In
this case, initiation of the differentiation approach is helping all the brands to have some sort of
distinctiveness and it is further helping them in promoting their brands in the market. These
differences are also helping the vendors in attracting the customers over others. Thus, it can be
concluded that differentiation strategy can also help the low cost organizations in gaining
competitiveness in helping in the branding activities.

9GLOBAL STRATEGY
Conclusion
In this essay, it is identified that differentiation strategy is more effective and applicable
for the low cost competitors due to the high level of competition in this sector. A few reasons are
being identified, which proves the benefits to be gained by the business organizations by
initiating the differentiation strategy. It is concluded that apart from the cost leadership and
market focus strategy, which are not applicable for the low cost competitors, differentiation is the
only way to gain competitive advantages in the market.

10GLOBAL STRATEGY
Reference
Adams, R., Jeanrenaud, S., Bessant, J., Denyer, D., & Overy, P. (2016). Sustainability‐oriented
innovation: a systematic review. International Journal of Management Reviews, 18(2),
180-205.
D. Banker, R., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to
more sustainable financial performance than a cost leadership strategy?. Management
Decision, 52(5), 872-896.
E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), 32-45.
Heidenreich, S., & Spieth, P. (2013). Why innovations fail—the case of passive and active
innovation resistance. International Journal of Innovation Management, 17(05),
1350021.
Jarzabkowski, P., & Kaplan, S. (2015). Strategy tools‐in‐use: A framework for understanding
“technologies of rationality” in practice. Strategic Management Journal, 36(4), 537-558.
Mathooko, F. M., & Ogutu, M. (2015). Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management, 29(3), 334-354.
Meissner, D., & Kotsemir, M. (2016). Conceptualizing the innovation process towards the
‘active innovation paradigm’—trends and outlook. Journal of Innovation and
Entrepreneurship, 5(1), 14.

11GLOBAL STRATEGY
Ray Gehani, R. (2013). Innovative strategic leader transforming from a low-cost strategy to
product differentiation strategy. Journal of technology management & innovation, 8(2),
144-155.
Rong, H. U., Hongshan, X. I. A., & Jiang, Y. (2013). Complex dynamics for airlines' price
competition with differentiation strategy. Journal of Transportation Systems Engineering
and Information Technology, 13(1), 11-16.
Ryszko, A. (2016). Proactive environmental strategy, technological eco-innovation and firm
performance—Case of poland. Sustainability, 8(2), 156.
Skokan, K., Pawliczek, A., & Piszczur, R. (2013). Strategic planning and business performance
of micro, small and medium-sized enterprises. Journal of competitiveness, 5(4).
Srivastava, M., Franklin, A., & Martinette, L. (2013). Building a sustainable competitive
advantage. Journal of technology management & innovation, 8(2), 47-60.
Volberda, H. W., Van Den Bosch, F. A., & Heij, C. V. (2013). Management innovation:
Management as fertile ground for innovation. European Management Review, 10(1), 1-
15.
Yunna, W., & Yisheng, Y. (2014). The competition situation analysis of shale gas industry in
China: Applying Porter’s five forces and scenario model. Renewable and Sustainable
Energy Reviews, 40, 798-805.
Zehir, C., Can, E., & Karaboga, T. (2015). Linking entrepreneurial orientation to firm
performance: the role of differentiation strategy and innovation performance. Procedia-
Social and Behavioral Sciences, 210, 358-367.

12GLOBAL STRATEGY