Product differentiation

Question 1

Definition?

Answer 1

Distincted from conventional products; delivering added values beyond that of competing products

Higher positive, smaller neg. impacts

Question 2

3 core principles of production differentiation

Answer 2

1. WTP for increased env. quality to make price premium possible or gain market shares
2. Credible information about env. and other attributes of the product(s)
3. Barriers to imitation by competitors to sustain competitive advantage

Question 3

The VRIN test - what is it?

Answer 3

Tests if differentiation strategies can maintain competitive advantage over time? long term vs. short term.

Long term if all follow criterias:

Value:
does the resources and capabilities contribute to the firms ability to outperform their competitors? improvements in efficiency and effectiveness of the strategy

Rarity:
is the resources and capabilities rare among current and potential competitors? to get and put in use

Imperfect imitability:
is the resources and capabilities difficult or costly yo imitate?

Non-substitutability:
can the resources and capabilities be replaced by an alternative?

Question 4

What are two additional strategies to VRIN?

Answer 4

• Continous innovation - make it even more unique
• Improvement of the system of activities and the resources of the firm, and their interconnections