With intense competition, thus a differentiation strategy helps create barriers to entry that protect your organization and its industry from new competition. Also.
Competitive advantage can be defines as a superiority gained by your organization when it can provide the same value as its competitors but at a lower price, or can charge higher prices by providing greater value through differentiation, segmentation and differentiation allows your organization to come close to maximizing the potential revenue by offering each segment a differentiated product at a different price. Also, when pursuing a differentiation strategy, your organization can achieve a competitive advantage by ensuring that its economic value exceeds that of its competitors, economic value, in turn, is simply the difference between the perceived value of a good to a customer and the total costs per unit, including costs of capital, to produce the good.
In economics, successful product differentiation leads to competitive advantage and is inconsistent with the conditions for perfect competition, which include the requirement that the products of competing firms should be perfect substitutes, there will always be competitors offering better quality products at lower prices so you have to have your value and price aligned correctly. To summarize, through differentiation at the product level, different brands from different businesses can easily be identified by the consumer.
Product differentiation by itself will have to be of little value unless the difference so achieved attracts and captures the imagination of customers, positioning yourself as having the best product, or the best prices, is no longer a viable differentiation strategy, also, as a direct effect, service differentiation represents competitor orientation, which is part of the market orientation and is possible to conceptualize as a direct effect on business performance.
The differentiation strategy and organizational culture stands out as one of the components that are important to sustaining competitive advantage, performance, and a good reason for becoming a great institution and company, your organization can be confident that its strategy has resulted in one or more useful competitive advantages only after competitors efforts to duplicate its strategy have ceased of failed. Along with, use your value proposition as a jumping off point to clearly and succinctly convey why your brand is the leader.
Monopolistic competition assumes that there are many organizations in the industry and that no organization identifies any other single organization as its rival, it is the combination of elements in the business model which enables your organization to better satisfy the needs in its environment, earning economic rents in the process. Coupled with, a competitive advantage is an advantage gained over competitors by offering customers greater value, either through lower prices or by providing additional benefits and service that justify similar, or possibly higher, prices.
Where the market information flows freely, competition plays a regulatory function in balancing demand and supply, if your whole value proposition is based around a single characteristic of differentiation, you are leaving yourself extremely exposed to competitors. Also, one objective of every competitive strategy is the elimination of competition, to create a monopoly-like environment.
Differentiation involves being perceived by the market place as having a relatively higher value to the customer or user than the offerings of its competitors, and often at the same or even higher pricing levels, for most industries the intensity of competitive rivalry is the biggest determinant of the competitiveness of the industry, for example, regardless of the number of key competitors your organization faces it is vital for its longevity that you understand the differences between your rivals.
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