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KDASk. Reefa

Regd. No: 9026

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Differentiation Cost leadership Barriers to entry

Barriers to exit

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1.DifferentiationDef: Differentiation is the

process of distinguishinga product or service from

others. To attract more to a

particular target Market. This involves differentiating

it from competitorsproducts as well as a firm'sown products.

The concept was proposed

by Edward Chamberlin inhis 1933.

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Pros & Cons

Cons: Worrying aboutcompetitors' copying itsbusiness methods andstealing away its customers.

Implementing adifferentiation strategy iscostly.

It may take years before aCompany achieves a strongbrand image.

The company faces the riskof changing consumer tastesor preferences.

Pros: Charging from

customers a premiumprice for a product orservice.

Competitive advantage Strong corporate identity. Customer loyalty helps in

stabilizing the company'srevenue.

Higher supplier costs toits customers because ofthe lack of substitute oralternative products.

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Porters five forces Customers are loyal

purchasers of differentiatedproducts.

Uniqueness and loyaltyreduces, customers sensitivityto price increases

Provide high qualitycomponents, driving up firmscosts&Cost may be passed onto customer.

Substantial barriers (seeabove) and would requiresignificant resourceinvestment.

Customer loyalty effectivelypositions firm against productsubstitutes.

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Example

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2. Cost leadership

Cost leadership is a conceptdeveloped by MichaelPorter, used in businessstrategy.

It describes a way toestablish the competitiveadvantage.

In basic words it means thelowest cost of operation inthe industry.

This patterns consist insuperior customerservice and productleadership.

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Porters five forces

Rivals hesitate to competeon the basis of price.

Powerful buyers can forcecost leader to reduce pricesup to a point.

Cost leaders can absorbsuppliers price increases.

Efficiency can serve as abarrier to entry.

Can reduce prices whenfaced with substitutes.

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3. Barriers to entry These are the obstacles

that make a Firm difficult toenter a given Market

The hindrances a firmfaces in trying to entera industry such asgovernment regulation & patents, licensing requirements.

Barriers to entry protectincumbent Firms andrestrict competition in aMarket.

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It Includes. Advertising Capital Control of Resources

Cost advantagesindependent of scale

Customer loyalty Economy of scale Government regulations Inelastic demand Intellectual property Sunk costs Tariffs

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4. Barriers to exit These are the Obstacles or

impediments that prevent acompany from exiting amarket.

Typical barriers to exitinclude highly specializedassets.

common barrier to exit isloss of customer goodwill.

Reasons are Obstacles thatmake it costly for a firm toexit a market.

Barriers to exit intensifycompetition in a market.

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Reasons for it

1. Perceived or realimpediments

2. Legal restrictions

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THANK YOU