The differentiation strategy was proposed by
Michael Porter
as one of the “strategies of competitive advantage.”
A differentiation strategy aims to sell even at a higher price by overwhelmingly differentiating your product from your competitors.
This article explains the meaning of differentiation strategy, IBM’s differentiation strategy, and Mos Burger’s success story of differentiation strategy.
What is differentiation strategy?
A differentiation strategy is a strategy that aims to achieve a competitive advantage by differentiating your company from other companies.
It was proposed by management scholar Michael Porter as one of the “strategies for competitive advantage.”
In the “strategy for competitive advantage” proposed by Michael Porter, the basic strategy of a company is to:
1.
cost leadership strategy
2.
differentiation strategy
3.
focused strategy
It is assumed that there are three. The meaning of each is as follows.
1. cost leadership strategy
A cost leadership strategy is
a strategy that targets a wide range of targets and uses “low prices” as a weapon to take the lead in the industry
. By thoroughly reducing costs, we can sell average-quality products at low prices and create a system that allows us to make profits even when selling at low prices.
McDonald’s, Uniqlo, Nitori, and Yamada Denki are well-known companies that have adopted a cost leadership strategy.
2. differentiation strategy
A differentiation strategy is
a strategy that aims at a wide range of targets and takes advantage of “characteristics that other companies do not have” to occupy a unique position in the industry
.
A typical example of a differentiation strategy is a luxury brand manufacturer.
By pursuing brand power that customers find “attractive,” we create a system that allows us to sell even at high prices.
Companies that use differentiation strategies include Mos Burger, Oriental Land, Nintendo, Don Quijote, and Starbucks.
3. focused strategy
Concentration strategy is a strategy that promotes cost leadership or differentiation by
concentrating management resources on specific regions or consumers
.
Even companies with relatively small capital and size will be able to compete with large companies for specific customer groups.
Suzuki, Sharp, Olympus, and Shimamura are well-known companies that have adopted a concentration strategy.
IBM’s differentiation strategy
IBM, which has always led the industry as a giant in the computer world, is embarking on a differentiation strategy to take advantage of its strengths and gain a new position in response to changes in the IT technology used in business. It is said.
As a pioneer, we sold our PC server business to Lenovo, followed by the sale of our semiconductor manufacturing business to another company.
IMB aims to
1.
cloud management software
2.
Supporting the cloud through openness
3.
Utilizing mainframes in SoE
It is said that this is what differentiates us from other companies.
1. cloud management software
IBM’s PC server business lost its edge as computer processing power improved and hardware prices fell dramatically.
Then, with the advent of the cloud, IBM sold not only its PC server business but also its semiconductor manufacturing business, and made a major shift toward providing cloud management software.
The more a company uses the cloud, the more complex and time-consuming it becomes to manage. Cloud management can directly utilize the technology developed for mainframes, so developing software for cloud management and operation is an area where IBM can leverage its strengths.
2. Supporting the cloud through openness
Companies that provide cloud services, such as Google, are promoting businesses that analyze and utilize big data stored in the cloud.
High-performance processors are required to process big data at high speeds.
IBM has made the technology of its high-performance processor “POWER Processor” open and has also established the industry organization “OpenPOWER Foundation.”
More than 70 IT companies, including Google, are participating in this organization, and it is said that there is a high possibility that IBM’s POWER processors will become widespread as infrastructure for cloud provider companies.
3. Utilizing mainframes in SoE
In the IT field, a major issue is how companies can build relationships with customers, including e-commerce sites.
A system for deepening relationships with customers is called a “System of Engagement (SoE),” whereas a system for core business operations is called a “System of Record (SoR).”
SoR systems are built on mainframes, which is IBM’s specialty.
In contrast, SoE systems have traditionally been built using PCs or UNIX servers.
IBM is developing a system that can perform both SoR and SoE on mainframes.
As a result, compared to previous systems that performed SoR and SoE on separate servers, processing speed has been dramatically improved, making it possible to develop services that were previously unimaginable.
Mos Burger’s success story of differentiation strategy
The management strategy of Mos Burger (Mos Food Service) is known as a successful example of a differentiation strategy against McDonald’s. The point of differentiation is
1.
Number of menu items and pricing
2.
store display
can be summarized into two.
1. Number of menu items and pricing
McDonald’s keeps their menu items small.
The operation for serving burgers will be easier and the prices will be lower. Compared to McDonald’s, Mos Burger has twice as many menu items as McDonald’s.
Increasing the number of menu items allows you to cater to a variety of customer tastes, but it also increases prices.
In the late 1990s, a competition to lower the price of hamburgers broke out, starting with McDonald’s. At that time, Mos Burger is known for maintaining its prices while its competitors slashed prices one after another.
2. store display
McDonald’s store displays are said to be aimed at increasing customer turnover, especially in stores in downtown areas and in front of stations.
Mos Burger, on the other hand, is said to have created a store that is comfortable and makes you feel relaxed even if you stay for a long time, by using natural colors and installing ornamental plants.
It can be said that Mos Burger has succeeded in building a unique position by adopting a differentiation strategy of taking a high-quality, high-price route compared to the industry powerhouse McDonald’s.
summary
◆Differentiation strategy is a strategy that aims to achieve competitive advantage by differentiating itself from other companies ◆IMB is embarking on a new differentiation strategy that leverages its own strengths ◆Mos Burger’s high quality and High-priced routes are examples of successful differentiation strategies