What are the Risks of a Differentiation Strategy?

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Competitive Advantage > Forum > What are the Risks of a Differentiation Strategy?

What are the Risks of a Differentiation Strategy?
john, Student (University), Member
What are the risks involved when using differentiation as a competitive strategy? Why?

Pitfalls of a Differentiation Strategy
Jaap de Jonge, Editor, Netherlands
In my opinion, the main risks of a differentiation strategy are:
1. Differentiation is not sustained, because
1a. Competitors imitate.
1b. A base for differentiation becomes less important to buyers.
2. Cost proximity is lost (overly expensive).
3. A differentiation focuser achieves even greater differentiation in the same segment.

Keys to Differentiation Strategy
Joao Viggiani, Consultant, Brazil, Member
Inovation is one key to sustain a differentiation strategy.
Services is another key.
But, most of all, go back to Porter: "strategic positioning means performing different activities from rivals or performing similar activities in different ways".
With only 7 keys we have millions of different musics. Why not with business activities?

The Risks of Not Differentiating
Bernhard Keim, Business Consultant, Germany, Premium Member
The risks of differentiation can be reduced by testing the customers you have in mind. And, beyond that, what I also know is that doing what everyone else is doing, can be at least as risky.
Some time ago I had to provide advice to a supermarket in Eastern Europe. For some time it was a sure bet to open just another supermarket, providing more or less the same goods in the same way as everyone else. But then the marketplace got crowded. So there was little left for further growth. Nevertheless no one dared to break out. There were no discounters in the city and no one wanted to be the first one. Now German chains arrived at the market, taking away existing customers with new shop-formats. Because no one wanted to be different, the existing owners provided an open invitation to newcomers. They all lost.

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