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February 28, 2021

Strategy Aspects of Improvement Activity - Component of Manufacturing and Operations Strategy

 Manufacturing Strategy Course Page

Based on Chapter 7 Improvement Strategy (Slack & Lewis)

A large body of work has grown around how processes  can be developed, enhanced and generally improved.  All of operations strategy is concerned with improving operations. Strategic decision areas in manufacturing and operations strategy, such as capacity, supply networks and technology, are based on the implicit assumption that we take decisions in these areas in order to improve the operation. 

Processes improvement strategy explicitly declares the organisation's aspiration  to develop and improve processes on a more routine basis with important objectives, goals and methods specified as strategy. 

Importance of Improvement

Process Improvement gives competitive advantage.

‘The companies that are able to turn their . . . organisations into sources of competitive advantage are those that can harness various improvement programs . . . in the service of a broader [operations] strategy that emphasises the selection and growth of unique operating [capabilities].’

Process improvement

Two strategies are now recognized: breakthrough improvement and continuous improvement.

Breakthrough improvement

Breakthrough, or ‘innovation’-based, improvement assumes that the main vehicle of improvement is major and dramatic change in the way the operation works – the total redesign of a machining from general purpose machine tools to flexible manufacturing system. 

The impact of these improvements is relatively sudden, abrupt, and represents a step change in practice (and hopefully performance). Such improvements are rarely inexpensive, usually calling for high investment, and frequently involving changes in the product/service or process technology. 

A frequent criticism of the breakthrough approach to improvement is that such major improvements are, in practice, difficult to realise quickly.

Continuous improvement

Continuous improvement, as the name implies, adopts an approach to improving performance that assumes more and smaller incremental improvement steps. Industrial engineering studies are concerned with continuous improvement.  This has now became more popular as kaizen under the mania for using Japanese terminology. 

Continuous improvement does see small improvements as having one significant advantage over large ones – they can be followed relatively painlessly by other small improvements. Continuous improvement becomes embedded as the ‘natural’ way of working within the operation. 

Some emphasize that, in continuous improvement (exclusively bottom up improvement) it is not the rate of improvement that is important; it is the momentum of improvement. It does not matter if successive improvements are small; what does matter is that every month (or week, or quarter, or whatever period is appropriate) some kind of improvement has actually taken place.




Some features of breakthrough and continuous improvement 

            Breakthrough improvement  Continuous improvement

Effect  Short-term - dramatic              Long-term activity to show similar effect

Pace        Big steps                            Small steps

Time-frame   Intermittent                          Continuous and incremental

Change       Abrupt                            Gradual and constant

Involvement Limited persons                       Everybody

                     (engineers and designers)

Stimulus       Technological breakthroughs, Learning while doing  

                      Inventions, new theories          

Investment  Large one-time    Small amounts many years   

Effort orientation  Technology                  People


Both breakthrough improvements and continuous improvement are to be implemented by organizations. Break through improvements are spearheaded by product and process engineering departments. Continuous improvement related to productivity is directed and managed by industrial engineering department. Quality improvement is managed by quality department. Delivery reliability is the responsibility of production planning department. Improvement teams interact and collaborate.

Improved strategy in Manufacturing Strategy. Three ways are to be planned. Improvements by Process Engineers - Improvements by Industrial Engineers - Improvements by Operators and their Supervisors and Managers. - Narayana Rao (4 Feb 2021. Shared on Social Media)


Improvement cycles

Continuous improvement occurs in cycles repeatedly  – a literally never-ending cycle of repeatedly questioning and adjusting the detailed workings of processes.

Degree of process change

Modification -  Extension -  Development - Pioneer

Direct, develop and deploy


The strategic improvement cycle we describe  employs the three  elements of direct, develop and deploy, plus a market strategy element.

Direct. 

Some authorities argue that the most important feature of any improvement path is that of selecting a direction (Total Productivity Management). A company’s intended market position has to provide direction to  how the operations function builds up its resources and processes.

Even micro-level, employee-driven improvement efforts must reflect the intended strategic direction of the firm.

Develop. 

Within the operations function those resources and processes that are expected tocontribute to competitive advantage are increasingly understood and developed over time so as to establish the capabilities of the operation. Essentially this is a process of learning.

Deploy. 

Operations capabilities need to be leveraged into the company’s markets. These capabilities, in effect, define the range of potential market positions which the company may wish to adopt. But this will depend on how effectively operations capabilities are articulated and promoted within the organisation.

Market strategy. The potential market positions that are made possible by an operation’s capabilities are not always adopted. An important element in any company’s market strategy is to decide which of many alternative market positions it wishes to adopt. Strictly, this lies outside the concerns of operations strategy. 

Process of Setting the Direction

Performance Planning Monitoring, and Control

Performance measurement

Performance measurement based on performance plans gives the inputs for planning improvements.

Performance measurement, concerns four generic issues:

● What factors should be included as performance targets?

● Which are the most important?

● How should they be measured?

● On what basis should actual against target performance be compared?


Which are the most important performance targets?

So, for example, an international company that responds to oil exploration companies’ problems during drilling by offering technical expertise and advice might interpret the five operations performance objectives as follows:

●● Quality. Operations quality is usually measured in terms of the environmental impact during the period when advice is being given (oil spillage, etc.) and the long-term stability of any solution implemented.

●● Speed. The speed of response is measured from the time the oil exploration company decides that it needs help to the time when the drilling starts safely again.

●● Dependability. Largely a matter of keeping promises on delivering after-the-event checks and reports.

●● Flexibility. A matter of being able to resource (sometimes several) jobs around the world simultaneously, i.e. volume flexibility.

●● Cost. The total cost of keeping and using the resources (specialist labour and specialist equipment) to perform the emergency consultations.


Some typical partial measures of performance



Quality  


Number of defectives of the process per unit time 

Level of customer complaints

Scrap level

Warranty claims

Mean time between failures of the product

Customer satisfaction score


Speed


Order lead time

Actual versus theoretical throughput time

Cycle time


Dependability

Percentage of orders delivered late

Average lateness of orders

Proportion of products in stock

Schedule adherence


Flexibility

Time needed to develop new products/services

Range of products/services

Machine change-over time

Average batch size

Time to change schedules


Cost  

Variance against budget

Utilisation  of resources

Labour productivity

Added value

Efficiency

Cost per operation/process hour



Benchmarking

Another very popular, method  to drive organisational improvement is to establish operational benchmarks. By highlighting how key operational elements ‘shape up’ against ‘best in class’ competitors, key areas for focused improvement can be identified. 

Types of benchmarking


There are many different types of benchmarking  some of which are listed below.

● Competitive benchmarking is a comparison directly between competitors in the same, or similar, markets.

● Non-competitive benchmarking is benchmarking against external organisations that do not compete directly in the same markets.

● Performance benchmarking is a comparison between the levels of achieved performance in different operations. 

● Practice benchmarking is a comparison between an organisation’s operations practices, or way of doing things, and those adopted by another operation.


Importance–Performance Mapping

From market requirements the following are established:

● the needs and importance preferences of customers; and

● the performance and activities of competitors.

Both importance and performance have to be brought together before any judgement can be made as to the relative priorities for improvement. Both importance and performance need to be viewed together to judge improvement priority.

The importance–performance matrix

The priority for improvement that each competitive factor should be given can be assessed from a comparison of their importance and performance. This can be shown on an importance–performance matrix which, as its name implies, positions each competitive factor according to its score or ratings on these criteria. 

The sandcone theory

Some writers  believe that there is also a generic ‘best’ sequence in which operations performance should be improved. The best-known theory of this type is sometimes called the sandcone theory. The theory originally proposed by Kasra Ferdows and Arnoud de Meyer is as follows.

The sandcone model incorporates two ideas. 

The first is that there is a best sequence in which to improve operations performance; the second is that effort expended in improving each aspect of performance must be cumulative. In other words, moving on to the second priority for improvement does not mean dropping the first, and so on.

Developing operations capabilities

Underlying the whole concept of continuous improvement is the idea that  small changes, continuously applied, bring big benefits as cumulative total. Small changes are relatively minor adjustments to resources and processes and the way they are used. It happens through  the way in which humans learn to use and work with their operations resources and processes. Their understanding, ingenuity and creativity is the basis of capability development. 

Learning, therefore, is a fundamental part of operations improvement. Here we examine two views of how operations learn. The first is the concept of the learning curve, a largely descriptive device that attempts to quantify the rate of operational improvement over time. The second is  operations’ learning driven by the cyclical relationship between process control and process knowledge.

Process knowledge

Central to developing operations capabilities is the concept of process knowledge. 

The more we understand the relationship between how we design and run processes and how they perform, the easier it is to improve them.

For most operations manufacturing persons have at least some idea as to why the processes behave in a particular way. The path of process improvement is along  operations managers attempt to learn more. It is useful to identify some of the points along this path. 

One approach to this has been put forward by Roger Bohn. He described an eight-stage scale ranging from ‘total ignorance’ to ‘complete knowledge’ of the process.

● Stage 1, Complete ignorance. There is no knowledge of what is significant in processes. 

● Stage 2, Awareness. There is an awareness that certain phenomena exist and that they are probably relevant to the process, but there is no formal measurement or understanding of how they affect the process. Managing the process is far more of an art than a science, and control relies on tacit knowledge (that is, unarticulated knowledge within the individuals managing the system).

● Stage 3, Measurement. There is an awareness of significant variables that seem to affect the process with some measurement, but the variables cannot be controlled as such. The best that managers could do would be to alter the process in response to changes in the variables.

● Stage 4, Control of the mean. There is some idea of how to control the significant variables that affect the process.  Managers can control the average level of variables in the process, even if they cannot control the variation around the average. Once processes have reached this level of knowledge, managers can start to carry out experiments and quantify the impact of the variables on the process.

● Stage 5, Process capability. The knowledge exists to control both the average and the variation in significant process variables. This enables the way in which processes can be managed and controlled to be written down in some detail. 

● Stage 6, Know how. By now the degree of control has enabled managers to know how the variables affect the output of the process. They can begin to fine-tune and optimise the process.

● Stage 7, Know why. The level of knowledge about the processes is now at the ‘scientific’ level with a full model of the process predicting behaviour over a wide range of conditions. At this stage of knowledge, control can be performed automatically, probably by microprocessors. The model of the process allows the automatic control mechanisms to optimise processing across all previously experienced products and conditions.

● Stage 8, Complete knowledge. In practice, this stage is never reached, because it means that the effects of every conceivable variable and condition are known and understood, even when those variables and conditions have not even been considered before. Stage 8 therefore might be best considered as moving towards this hypothetically complete knowledge.

Source: from Bohn, R.E. (1994) ‘Measuring and managing technical knowledge’, MIT Sloan Management Review, Fall 1994, article no. 3615.


The strategic importance of operational knowledge

One of the most important sources of process knowledge is the routines of process control. Process control, and especially statistically based process control results in knowledge. Knowledge it is vital to establishing an operations-based strategic advantage.


Deploying capabilities in the market

Operations capabilities are of little benefit if not used. Indeed, it could be argued that operations capabilities do not really exist unless they are used. They remain nothing more than unrealised potential. A vital element in strategic operations improvement, therefore, is the ability to leverage developed operations capabilities into the market. Not that operations capability will necessarily exclusively define a company’s market position. We are not suggesting that because a company’s operations have a particular capability it should always attempt to exploit it in the market. But the deployment of capability does create potential in the market. 

How this potential is realised (or not) and how organisations target market segments is beyond the scope of this book. However, what is very much important to operations strategy is how the operation can deploy its capabilities to provide the potential for the organisation to inhabit profitable market segments.

The four-stage model of the Operations Strategic Function Improvement

The ability of any operation to contribute to opening up market potential for the organisation and the organisational aims, expectations and aspirations of the operations function has been captured in a model developed by Professors Hayes and Wheelwright of Harvard University and Professor Chase of the University of Southern California, they developed what they call the ‘Four-Stage Model’, which is ideal for evaluating the effectiveness of the contribution/expectation cycle. 

The model has four stages of evolution of the operations function.

Stage 1 – internal neutrality

In a Stage 1 organisation, the other functions in the organisation regard it as holding them back from competing effectively. The operations function, they would say,  has very little positive to contribute towards competitive success. The best that can be expected from the operations function is to solve the most obvious problems. The expectations on it are minimum and they hope it avoids  big mistakes.

Stage 2 – external neutrality

A Stage 2 operations function has achieved a sufficient level of capability to cease holding the company back.   It is  adopting ‘best practices’ and the best ideas and norms of performance from the rest of its industry. Its  operations capabilities similar to its competitors. This may not give the organisation any competitive advantage, but it is not a source of competitive disadvantage.

Stage 3 – internally supportive

Stage 3 operations may not be better than their competitors on every aspect of  operations performance, but they are broadly up with the best. Stage 3 operations aspire to be clearly and unambiguously the very best in the market. They try to achieve this level of contribution by a clear understanding of the company’s competitive or strategic goals. Then they organise and develop their operations resources to excel in the things in which the company needs to compete effectively. The expectation on the operations function is to be ‘internally supportive’ by providing credible support to operations strategy.

Stage 4 – externally supportive

A Stage 4 company is one that sees the operations function as providing the foundation for its  competitive success, because it is able to deploy unique competencies which provide the company with the performance to compete in future market conditions. In effect, the contribution of the operations function becomes central to strategy making.  Stage 4 operations are creative and proactive. They are likely to organise their resources in ways that are innovative and capable of adaptation as markets change. Essentially they are expected to be ‘one step ahead’ of competitors – what Hayes and Wheelwright call being ‘externally supportive’.

Moving from Stage 1 to Stage 2 requires operations to overcome its problems of implementing existing strategies. 

The move from Stage 2 to Stage 3 requires operations actively to develop its resources so that they are appropriate for long-term strategy. 

Moving up to Stage 4 requires operations to be driving strategy through its contribution to competitive superiority. 

Two points are important in understanding the power of the four-stage 1 to 4 model. 

First, it is linked to the company’s aspirations (at least their operations management aspirations). In other words, there is an active desire (some might say even an evangelical desire) to improve the operation. 

Second, it is the endpoint of progression which emphasises the increasing importance and centrality of operations strategy to overall competitive advantage. The idea of a proactive and inventive ‘Stage 4’ operations function, described by Hayes and Wheelwright, foreshadows the somewhat later concept of ‘world-class operations’. 

That is, the idea that companies should aspire not only to have performance levels equal to, or better than, any other similar business in the world, but should achieve this superiority because of their operations ability.



Updated on 4 February 2021

Published on 31 Jan 2021

February 27, 2021

New Product Development - Role of Marketing

Browse  Online MBA Management Theory Handbook





Marketing Management Revision Article Series





Existing products of a company are vulnerable to changing consumer needs and tastes, new technologies that enhance the quality, capability and flexibility of products, shortened product life cycles (market saturation happening very quickly) and increased domestic and global competition. Hence new product development is an imperative for organizations. 

But failure rate of new products is very high. The new product failure rate in packaged goods industry (mostly of line extensions) is estimated to be 80 percent.  Clancy and Shulman estimate that similar failure rate occurs in financial services products also. Cooper and Kleinschmidt estimate that about 75% of new products fail at the launch stage itself.

Why do new products fail?

Product and Development related reasons

The product may not have been designed well.
The development cost may have exceeded estimates and the require priced realization may not be feasible in the market.

Marketing related reasons.

Market size may have been overestimated.
A high level executive must have pushed the idea even though market research has given negative findings.
The product may have been overpriced.
Not positioned properly.
Not advertised effectively.
Competitors fought back harder than expected.

What are the success factors in new product development and marketing?

Cooper and Kleinschmidt found that the number one success factor is a unique superior product.
The second factor is a well-defined product concept focused on a specific selected target market.

Madique and Zirger found eight factors.

1. Deeper understanding of the customer needs.
2. Higher performance to cost ratio
3. Early introduction of the product in relation to competitor (early mover advantage)
4. Higher expected contribution margin
5. Higher outlay on advertising.
6. Greater top management support
7. Greater cross-functional teamwork.

Role of marketing is very important to develop a deeper understanding of customer needs, tastes and wants at the point in time.

Managing the New Product Development Process

The new product development has 8 stages. There are major marketing challenges in each stage. Marketing has to be provide inputs and make sure the market requirements are understood and included in the product related outputs at each stage.

New Product Development Process - 8 Stages

1. Idea Generation
2. Idea Screening
3. Concept Development and Testing
4. Marketing Strategy Development
5. Business Analysis
6. Product Development
7. Market Testing
8. Commercialization


Marketing Strategy for New Industry Products

Adoption of New Products and Processes

Updated on 28 Feb 2021, 4 June 2014
















Managing Product Lines and Brands

Browse  Online MBA Management Theory Handbook


Marketing Management Revision Article Series




This article discusses marketing decisions related to product mix of firms.
___________________________________________________________




Product


A product is anything that can be offered to a market to satisfy a want or need.

We can see around us that physical goods (food items, televisions), services (taxi rides, film shows), persons (models, film actors), places (various tourist destinations), organizations (religious organizations, voluntary organizations), and ideas (family planning, safe driving are among the products that are marketed.

Five levels of a product


The marketer needs to understand that a market offer of a product can be made five levels.

1. Core benefit
2. Basic product
3. Expected product
4. Augmented product
5. Potential product.

1. Core benefit

Core benefit is the fundamental service or benefit that the customer is really buying. Marketers must be benefit providers. They try to sell or market products that deliver core benefit to the customer.

Every product is bought by buyers because it serves a core benefit to them. Companies have to design their product to deliver a core benefit. (This series of management articles are being written by me to facilitate revision of management knowledge. If no person is interested in revising and updating his knowledge of management subjects, this product will not have a market).

2. Basic product

The basic product is the product designed by a firm to deliver the core benefit. The firm has understood or noticed a need and then designed a product that delivers the need existing in the market.

3. Expected product

At the third level is the expected product. As a need is being satisfied by various products offered in the market place, people develop expectations about products. When the marketer finds these expectations about products that fulfill particular needs and designs his offering, it will be an expected product. Normally, expected product needs to be offered to have a presence in the market.

4. Augmented product

The customer can design features that positively surprises customers. This requires additional effort by the marketer to find features which are valued by customers and then offering them. 

Kotler says today's competition takes place at the augmented product levels.  To find augmentation opportunities, marketers have to find out how customers are using the products that satisfy the core need. This will give ideas to that will provide additional convenience and utility.

Theodore Levitt said, today's competition occurs over many features added to the manufactured product like warehouses, delivery arrangements, customer advice etc.

It is to be noted that augmented features have to bring incremental benefit or profit to the firm.


5. Potential product.

While product augmentation refers to use of existing technology to augment products, potential product refers to development of new technology to enhance the product to provide new ways to satisfy customers. Companies that offer potential products invest a lot on research and development activities.

Delighting customers

Firms are now trying to exceed customer expectations and delighting them with unanticipated benefits. It is not any more customer satisfaction.

Product Hierarchy


Product hierarchy is another concept of product. Seven levels of product hierarchy are recognized.

1. Need family
2. Product family
3. Product class
4. Product line
5. Product type
6. Brand
7. Item


The example of a need family is products satisfying the core need of security of income. The product family is savings and income. The product class is financial instruments. The product line is mutual funds. The product type is systematic investment plan. The brand is prudential. The item is an index fund.

Product system is another concept related to product. This refers a group of diverse but related items that function in a related manner. Home theater systems could be an example.

Product mix (or product assortment) is the set of all products that a particular seller offers for sale to buyers.

Product Classifications


It is usual to refer to certain product classifications and explain marketing issues related to these classifications

Classification based on durability and tangibility


1. Nondurable goods.
2. Durable goods
3. Services

Classification based on use


1. Consumer goods
2. Industrial goods


Classification of consumer goods


1. Convenience goods
          Staples
          Impulse goods
          Emergency goods

2. Shopping goods
          Homogeneous shopping goods
          Heterogeneous shopping goods

3. Specialty goods

4. Unsought goods

Classification of industrial goods


1. Materials and parts
          Raw materials – farm products, natural products
          Manufactured materials – component materials and component parts

2. Capital items
          Installations
          Equipment

3. Supplies and business services
          Operating supplies
          Maintenance and repair items

Product Mix Decisions


The term product mix was already defined. In the area of product mix, marketing decisions are width, length, depth and consistency. 

Width refers to number of product lines (Refer the new product management article).

Length refers to the total number of items in a product line (different brands in a line).

Depth refers to variants of each product in a line (different pack sizes of a brand).

Consistency refers to how closely related the various product lines are in end use, production requirements, distribution channels, or some other way.

Kotler says explicitly that product mix planning is largely the responsibility of the company’s strategic planners. The top management has to assess with the information supplied by company’s marketers, which the product mix. Hence the product mix is a shared decision by various functions of the company and not that of marketing department alone.

Product line analysis


Marketers have the need to know the current and potential sales and profits of each item in a line in order to determine which items to build, sustain, harvest, or divest.

They need to analyze the effect of increasing the length. Can more profit be made by increasing the length?

Brand Related Decisions


Concept of brand equity
Challenges of branding
Brand name decisions
Brand extensions
Brand repositioning (Positioning)
 

References


Philip Kotler, Marketing Management (Main text for revision and article)



_______________________________________________________



Related Knols in Marketing


Marketing articles Label  http://nraomtr.blogspot.com/search/label/Marketing%20Management
Article on differentiating and positioning http://nraomtr.blogspot.com/2011/11/marketing-strategy-differentiating-and.html





________________________________________________________________
  Originally posted in
http://knol.google.com/k/managing-product-lines-and-brands#

Updated on  3 March 2019,  4 June 2014

February 25, 2021

Core Competencies - Concept - The Present Status




2015
Bain & Co. Note
http://www.bain.com/publications/articles/management-tools-core-competencies.aspx

Idea of Core competence
Sep 15th 2008
http://www.economist.com/node/12231124


Strategic Management and Core Competencies: Theory and Application


Anders Drejer
Greenwood Publishing Group, 2002 - Business & Economics - 224 pages


Managers and management scholars alike need operational models and concepts for dealing with core competencies within strategic management. This book provides tools for the practitioner as well as fundamental theoretical concepts to enable scholars to further build upon Drejer's work. His main argument is that understanding core competencies is key to explaining why some firms enjoy a competitive advantage over others. Drejer proposes models and means with which managers can proactively identify, design, and develop their firm's core competencies in strategic alignment.

More than merely a how-to book, this work places an equal emphasis on the concepts behind competence-based strategy. The author offers the reader multiple perspectives on the background of competence-based strategy, the relationship between strategic management and the development of core competencies, and the application of competence-based strategy to praxis. He provides the tools necessary to identify, analyze, and develop the competencies of a firm, and in so doing performs a valuable service for practitioners and researchers.


https://books.google.co.in/books?id=0pe7G3ztbK0C

In the above book, from page 102, definition of and explanation of competencies are given.


Updated on 26 Feb 2021
Pub on 20.102016

Marketing Strategy - Differentiating and Positioning the Market Offering




Marketing Strategy

 
Philip Kotler discussed five issues of marketing strategy in his Marketing Management

Differentiating and Positioning the Market Offering


Managing Life cycle Strategies

Designing marketing Strategies for Market Leaders, Challengers, Followers, and Niches



   
These issues are covered in different articles  by me in  Management Theory Revision


This article  describes differentiating and positioning the market offering.   
 
Differentiating and Positioning the Market Offering



The issues discussed in the area of differentiating and Positioning the market offering are:

  • Tools for Competitive Differentiation
  • Developing a Positioning Strategy
  • Communicating the Company’s Positioning

Tools for Competitive Differentiation

Differentiation - Definition: is the act of designing a set of meaningful differences to distinguish the company's offering from competitor's offerings.



Boston Consulting Group's differentiation opportunities matrix: Actually it is a competitive advantage matrix applicable to differentiation opportunities. 

Four types of industries identified by BCG matrix are:



Volume industry: only a few but very large competitive advantages are possible. The benefit of the advantage is proportional with company size and market share. Example given - construction industry.



Stalemated industry: in this type there are only few opportunities and the benefit from each is small. The benefit is also not proportional to the size or market share.


Example: Steel industry - It is hard to differentiate the product or decrease its manufacturing cost.


Fragmented industry: in this type, there are many opportunities, but the benefit of each of them is small. Benefit does not depend on size or market share.

Specialized industry: in this type, the opportunities are more and benefit of each opportunity is high. The benefit is not related to size or market share.

Kotler mentions, Milind Lele's observation that companies differ in their potential maneuverability along five dimensions: their target market, product, place (channels), promotion, and price. The freedom of maneuver is affected by the industry structure and the firm's position in the industry. For each potential competitive opportunity or option limited by the maneuverability, the company needs to estimate the return. Those opportunities that promise the highest return define the company's strategic leverage. The concept of maneuverability brings out the fact that a strategic option that worked very well in one industry may not work equally well in the other industry because of low maneuverability of that option in the different industry and by the firm in consideration.

Five Dimensions of Differentiation



To differentiate market offering, five dimensions can be utilized.  



Product

Services that accompany marketing, sales and after sales services.

Personnel that interact with the customer

Channel

Image

 
Differentiating a Product

There is a continuum among products regarding ability to differentiate. In certain products, it is generally assumed that no differentiation is possible. At the other extreme are products capable of high differentiation such as automobiles, commercial buildings and furniture. The main differentiators used by companies are features, performance, conformance, durability, reliability, repeatability, style and design.

Features

Features are characteristics that supplement the product's basic function.

Quality:  performance and conformance

Performance - Kotler states that products can be offered at four performance levels: low, average, high and superior.

In simple,  the performance quality is exhibited by the prototype or the exhibited sample.

Conformance - The performance of every item made by the company under the same specification.

Conformance quality is the degree to which all the produced units are identical and meet the promised target specification.

If the production conformance quality is low, the product will disappoint many buyers.

Durability

Durability is a measure of the product's expected operating life under natural or stressful  condition.


Reliability

Repairability

Style

Design


Services differentiation



Ordering ease

Delivery

The delivery characteristic associated with product includes speed, accuracy, and care with which delivery is made.  

Installation

Customer training

Customer consulting

Miscellaneous services


Personnel Differentiation

Competence

Courtesy

Credibility
Reliability
Responsiveness
Communication

Channel differentiation
Coverage
Expertise of the channel managers
Performance of the channel in ease of ordering, and service, and personnel

Image differentiation
First distinction between Identity and Image - Identity is designed by the company and through its various actions company tries to make it known to the market.
Image is the understanding and view of the market about the company.
An effective image does three things for a product or company.
1. It establishes the product's planned character and value proposition.
2. It distinguishes the product from competing products.
3. It delivers emotional power and stirs the hearts as well as the minds of buyers.
The identity of the company or product is communicated to the market by
Symbols
Written and audiovisual media
Atmosphere of the physical place with which customer comes into contact
Events organized or sponsored by the company.
 

Developing a Differentiation Strategy

Levitt and others have pointed out dozens of ways to differentiate an offering(Theodore Levitt: "Marketing success through differentiation-of anything", Harvard Business Review, Jan-Feb, 1980)


While a company can create many differences, each difference created has a cost as well as consumer benefit. A difference is worth establishing when the benefit exceeds the cost. More generally, a difference is worth establishing to the extent that it satisfies the following criteria.

  
Important: The difference delivers a highly valued benefit to a sufficient number of buyers.

Distinctive: The difference either isn't offered by others or is offered in a more distinctive way by the company.

Superior: The difference is superior to the ways of obtaining the same benefit.

Communicable: The difference is communicable and visible to the buyers.

Preemptive: The difference cannot be easily copied by competitors.

Affordable: The buyer can afford to pay the higher price

Profitable: The Company will make profit by introducing the difference.


Developing a Positioning Strategy

Positioning  
Positioning is the result of differentiation decisions. It is the act of designing the company's offering and identity (that will create a planned image) so that they occupy a meaningful and distinct competitive position in the target customer's minds.

The end result of positioning is the creation of a market-focused value proposition, a simple clear statement of why the target market should buy the product.


Example:

Volvo (station wagon)
Target customer-Safety conscious upscale families,
Benefit - Durability and Safety,
Price - 20% premium,
Value proposition - The safest, most durable wagon in which your family can ride.



How many differences to promote?

Many marketers advocate promoting only one benefit in the market (Your market offering may have many differentiators, actually should have many differentiators in product, service, personnel, channel, and image).


Kotler mentions that double benefit promotion may be necessary, if some more firms claim to be best on the same attribute. Kotler gives the example of Volvo, which says and "safest" and "durable".


Four major positioning errors
1. Underpositioning: Market only has a vague idea of the product.

2. Overpositioning: Only a narrow group of customers identify with the product.

3. Confused positioning: Buyers have a confused image of the product as it claims too many benefits or it changes the claim too often.

4. Doubtful positioning: Buyers find it difficult to believe the brand’s claims in view of the product’s features, price, or manufacturer.


Different positioning strategies or themes
1. Attribute positioning: The message highlights one or two of the attributes of the product.

2. Benefit positioning:  The message highlights one or two of the benefits to the customer.

3. Use/application positioning: Claim the product as best for some application.

4. User positioning: Claim the product as best for a group of users. - Children, women, working women etc.

5. Competitor positioning: Claim that the product is better than a competitor.

6. Product category positioning: Claim as the best in a product category Ex: Mutual fund ranks – Lipper.

7. Quality/Price positioning: Claim best value for price

Which differences to promote:



This issue is related to the discussion of worthwhile differences to incorporate into the market offering done earlier. But now competitors positioning also needs to be considered to highlight one or two exclusive benefits offered by the product under consideration.



 
Communicating the Company’s Positioning


Once the company has developed a clear positioning strategy, the company must choose various signs and cues that buyers use to confirm that the product delivers the promise made by the company.

References

Philip Kotler - Marketing Management



Management Articles and Concepts Directory

Planned Revision schedule for marketing chapters is in February and March

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Management Theory Review Blog  http://nraomtr.blogspot.com



Updated 26 Feb 2021

30 May 2019, 26 November 2011




February 20, 2021

JIT Theory - Extension to Supply Chains

 


CEP Discussion Paper No 1689

Revised August 2020

(Replaced April 2020 version)

Managing Global Production:

Theory and Evidence from Just-in-Time Supply Chains

Frank Pisch

https://cep.lse.ac.uk/pubs/download/dp1689.pdf










February 4, 2021

Supply Chain Improvement

 


Understanding supply chain improvement

Bernard Burnes, Steve New


European Journal of Purchasing & Supply Management

Volume 2, Issue 1, March 1996, Pages 21-30


The article  proposes three complementary models of supply chain improvement which, taken together, allow for a differentiated analysis of the phenomenon, and provide a robust basis for theoretical development. The article concludes that those suppliers who seek/achieve world class status are not only in a position to accomodate the differing approaches of their customers but can also, to a limited extent, choose which customers to supply.

https://www.sciencedirect.com/science/article/abs/pii/0969701295000186


Supply Chain Quality Management

By Lynn A. Fish

Published: August 1st 2011

DOI: 10.5772/19973

Supply chain quality management is a systems-based approach to performance improvement that integrates supply chain partners and leverages opportunities created by upstream and downstream linkages with a focus on creating value and achieving satisfaction of intermediate and final customers (Foster, 2008; Robinson & Malhotra, 2005). The intent of the chapter is to (1) review the positive impact of quality management on supply chain management, (2) present cases of supply chain improvements through quality management with a focus on the processes of design, production, delivery, support, and supplier-customer relationships, and (3) discuss the best practice recommendations, relationship between total quality management factors and transition to supply chain quality management that follow from these results.

https://www.intechopen.com/books/supply-chain-management-pathways-for-research-and-practice/supply-chain-quality-management