Organizing to realize the full potential of product differentiation strategiesSources of Differentiation AdvantageWays firms differentiate their products (Porter, 1980)1. product features2. linkages between functions3. timing4. location5. product mix6. links with other firms7. reputation Empirically derived bases of product differentiation (Caves and Williamson, 1985)1. products customized for specific customers2. product complexity3. emphasis on consumer marketing4. different distribution channels5. service and supportSources of costly duplicationBasis of product differentiationhistory uncertainty Social complexityLow cost duplication possibleProduct features _______ _______ _______May be costly to duplicateProduct mix * * *Links with other firms* _______ **Product customization* _______ **Product complexity* _______ *Consumer marketing_______ ** _______Usually costly to duplicateLinks between functions* * **Timing *** * _______Location *** _______ _______Reputation *** ** ***Distribution channels** * **Service and support* * **______ = not a source of costly imitation * = somewhat likely to be a source of costly imitation ** = likely to be a source of costly imitation*** = very likely to be a source of costly imitationOrganizing to realize the full potential of product differentiation strategiesOrganizational structure Management control systems Compensation policiesCross divisional / cross functional linkagesFlexibility in controlling activitiesRewards for risk taking, not punishment for failureWillingness to explore new structures to exploit new opportunitiesTolerance for creative people Rewards for creative flairIsolated pockets of intense creative effortsAbility to learn from innovative failuresSubjective / qualitative performance
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