Wednesday, April 13, 2011

Differentiation Strategy

My company, XXXXXX, is not the low-cost leader in our industry as all of our products are more expensive than our competitors. In looking at strategy options, as outlined in the ‘Types of Strategy: What Fits Your Business’ reading, my company has chosen, perhaps by default, the strategy of differentiation. What sets us apart? One word- quality. But what goes into 'quality'? Two main factors influence quality- engineering design and production. For the purposes of this posting, I will discuss engineering design.

Let us look at one of our products- XXXXXXX. The engineering design of our XXresults in a XXX that is superior to our competitors’ XX. How do we know this? First, a crash course on XXX. XXX are filled with a gas, SF-6. SF-6 gas is stable, acts as an insulator and extinguishes electrical arcs. When the XXXis ‘tripped’, the insulating properties of SF-6 gas prevent electrical arcing and flashovers, which could damage sensitive electrical equipment.

In order for the breaker to work correctly, it needs to maintain a specific level of SF-6 gas inside its tank. During the field installation of the XXX, SF-6 gas is pumped into and sealed in the breaker’s tank. If the seal becomes corrupted, the gas leaks out, and the breaker loses its protective ability. A good seal design insures the integrity of the breaker. And, our seal design is one of the best. Many of our breakers have been in the field for 20 years; the seals are maintained, and the gas remains in the breaker. Since SF-6 gas is not inexpensive, having a tank hooked up to continuously pressurize a XXX can be costly. Our competitors' products are cheaper to purchase, but more expensive to maintain in the long run. For customers who value quality, and can look at the long term view of costs, our products are the better choice. The quality of our products differentiates it from others. Question: This week, we had 4 readings. In those 4 readings, over a dozen companies were profiled to support the author’s point of view. Only 1 company was a manufacturing company; the rest produced consumer goods or provided services to consumers. Why is it so rare to see a business to business manufacturing company profiled for strategy discussions? Is the information not readily available? Is it not as interesting to profile a manufacturing company as opposed to a MacDonald’s or Wal-Mart that have name recognition?

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