Question

QUESTION 11 A potential weakness of the differentiation strategy is the tendency to cut costs in a way that undermines demand for the product or service True False QUESTION 12 Identifying a sustainable competitive strategy for a given firm can be described as a three-step process that includes all of the following EXCEPT Complete a SWOT (strengths, weaknesses, opportunities, and threats) analysis. Focus on sales growth to insure a firm or organization continues to grow Develop an information system in the form of a balanced scorecard for supporting the firm's overall strategy Develop relevant and reliable measures for the Critical Success Factors (CSFS)

Answer 1

11)

A differentiation strategy is an approach businesses develop by providing customers with something unique, different and distinct from items their competitors may offer in the marketplace. The main objective of implementing a differentiation strategy is to increase competitive advantage. A business will usually accomplish this by analyzing its strengths and weaknesses, the needs of its customers and the overall value they can provide.

Weakness of using differentiation strategy:

• Customer Perception

One weakness of using a differentiation strategy involves the challenge of changing the customer perception. Many consumers perceive the product as equivalent to alternative products offered in the marketplace at a lower price.

• Higher Cost

Pursuing a differentiation strategy requires a larger financial investment from the company.

Therefore, the answer is False.

12.) Sustainable Competitive Strategy

Sustainable competitive advantage is the key to business success. It is the force that enables a business to have greater focus, more sales, better profit margins, and higher customer and staff retention than competitors. It is the major driver of long-term business value and is what purchasers will place the most value on when looking to acquire a business.

At its most basic level, there are three key types of sustainable competitive advantage.

1. Cost advantage: the business competes on price.

2. Value advantage: the business provides a differentiated offering that is perceived to be of superior value.

3. Focus advantage: the business focuses on a specific market niche, with a tailored offering designed specifically for that segment of the market.

Therefore, to successfully compete, small businesses need to develop a sustainable competitive advantage that is based on providing superior value to a specific niche.

Five steps to developing a sustainable competitive advantage

1. Understand the market and its segments. Look for those niches that aren’t well serviced by competitors and can be profitably targeted and sold to.

2. Develop an understanding of what customers really want and establish a value proposition that grabs their attention.

3. Work out the key things that you need to do really well to support and deliver the value proposition. For example, service levels, quality, branding, pricing, et cetera.

4. Understand what your strengths and core competencies are and how you can use these in innovative ways to provide value to your chosen market.

5. Design your business model to support and deliver the value proposition.

At the end of this process, you will have a very clearly defined statement of:

• Who you will be selling to (customers and market segments);
• Why they will buy from you and not your competitors (the value proposition); and
• The key things you need to excel at to be able to consistently deliver your value proposition.

Once you’ve found your sustainable competitive advantage, you should use it in many ways, to the business’ benefit.

Therefore, critical success factors is not included in the sustainable competitive advantage/strategy.