Strategic Analysis: How Rolex Uses Differentiation for Market Success

This essay analyzes Rolex's generic strategy, arguing that differentiation is the most suitable approach for the company to maintain a competitive edge in the luxury watch market. It justifies this strategy by highlighting the nature of Rolex products, which cater to customers who value status and are willing to pay a premium. The essay explains how differentiation fosters customer loyalty, eliminates substitutes by offering unique features, strengthens brand reputation, and avoids price competition, ultimately leading to increased sales, a wider customer base, higher market position, reduced marketing costs, and greater profitability. The analysis references Michael Porter's generic strategies and provides examples such as the Rolex Submariner to illustrate the effectiveness of differentiation.

Running Head: ROLEX’S GENERIC STRATEGY
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Appropriate Generic Strategy for Rolex Company
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University Affiliation
Date

ROLEX’S GENERIC STRATEGY 2
Michael Porter presents three generic strategies that an organization can use to gain a
competitive edge in the industry that it operates in. The three strategies are cost leadership,
differentiation, and focus (Tanwar, 2013). Differentiation is the most suitable strategy that Rolex
Company can use to be more be competitive. In a differentiation strategy, an organization
concentrates on being unique in its industry. The uniqueness is along some organizational or
product dimensions which are highly valued by customers and influence customers’ buying
decisions (Brenes, Montoya, & Ciravegna, 2014). The suitability of this strategy to Rolex
Company can be justified by the following reasons.
Nature of the product: Rolex Company deals with luxury watches (Rolex, 2018). The
main drive that drives the customers into buying the watches is status quo. This class of people
does not mind about the price of the watches, therefore, they are ready and willing to pay a
premium to acquire the Rolex watches. In differentiation strategy, Rolex would, therefore, add
more unique features to their watches. According to Brenes, Montoya, & Ciravegna (2014)
unique features of a product attracts new customers and also a repurchase from the already
existing customers thus giving a firm a competitive edge.
Differentiation will create customer loyalty: customer loyalty refers to the tendency of a
customer to favor a brand or products of a particular organization. Customers become loyal to a
brand due to the value and the satisfaction that the brand delivers to them (Coelho & Henseler,
2012). Therefore, differentiation strategy will enable Rolex Company to develop watches that
have the most unique features in the market. Once customers buy the watches, they will be
satisfied with the value that watch delivers into them. This will make them to be faithful to the
Rolex brand and be willing to buy the various types of watches offered by the company.

ROLEX’S GENERIC STRATEGY 3
Differentiation eliminates substitutes: According to Dobbs (2014), threat of substitute
products is among the major competitive forces in an industry. Substitutes exist where the value
that the product delivers can be delivered by another product. Through differentiation strategy,
Rolex watches will be having features that no any other substitute product in the market has.
This will make the customers to view them as the best choice to serve their needs. For example,
the Rolex Submariner wristwatch with features such as waterproof and the ability to operate
underneath the sea, may not have any other substitute that can surpass it.
Differentiation strengthens brand reputation: Brand reputation refer to how people view a
particular brand. It plays a major role in influencing the position and performance of the brand in
the market (Akdeniz, Calantone, & Voorhees, 2013). Differentiation strategy will make Rolex
brand to be perceived as the one with the best and most unique brand in the market. This will,
therefore, make the ownership of a Rolex watch to be treasured among many people across the
world. Thus resulting to increased sales, wider customer base, higher market position, reduced
marketing cost, increased profitability, and market sustainability.
Differentiation eliminates price competition: According to Griva & Vettas (2011) price
competition refers to where firms compete on providing their products at the cheapest price in
the market. This mainly occurs in price-sensitive markets where the features of the products from
the different firms are almost similar. Application of differentiation strategy at Rolex Company
will make their watches to have features that cannot be matched with any other watch brand in
the market. The customers will, therefore, buy the Rolex watches despite the price due to their
uniqueness. This will save Rolex from price competition and make it to compete on quality
basis.

ROLEX’S GENERIC STRATEGY 4
References
Akdeniz, B., Calantone, R. J., & Voorhees, C. M. (2013). Effectiveness of marketing cues on
consumer perceptions of quality: The moderating roles of brand reputation and third‐
party information. Psychology & Marketing, 30(1), 76-89.
Brenes, E. R., Montoya, D., & Ciravegna, L. (2014). Differentiation strategies in emerging
markets: The case of Latin American agribusinesses. Journal of Business
Research, 67(5), 847-855.
Coelho, P. S., & Henseler, J. (2012). Creating customer loyalty through service
customization. European Journal of Marketing, 46(3/4), 331-356.
Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), 32-45.
Griva, K., & Vettas, N. (2011). Price competition in a differentiated products duopoly under
network effects. Information Economics and Policy, 23(1), 85-97.
Rolex. (2018). Discover more on Rolex.com. Retrieved from
https://www.rolex.com/watches/find-rolex.html
Tanwar, R. (2013). Porter’s generic competitive strategies. Journal of business and
management, 15(1), 11-17.