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BMW uses strategic alliances to leverage its existing resources and capabilities while working with partners to develop additional resources and capabilities as the foundation for differentiation.
Subsequently, Ferrell & Hartline (2010) noted that in the case of product differentiation, reality is often not as important as perception.
Firms that enjoy a solid image or reputation such as BMW can differentiate their vehicles based solely on the company or brand name alone.
The BMW’s differentiation strategy is designed to protect its market niche, particularly from Japanese, South Korean and American competitors.
It is important to note that BMW has succeeded historically by producing a narrow line of more exclusive cars for the price-insensitive and quality conscious customers.
BMW’s differentiation and brand loyalty also creates an entry barrier for other automobile companies seeking to enter the industry (Hill & Jones 2009).
A new automobile company must find a way to make its own cars and tracks distinctive to be able to compete with existing players such as BMW and Mercedes Benz.The differentiation strategy protects BMW from competitors when customers develop brand loyalty for its products.Hill & Jones (2009) established that differentiators are unlikely to experience problems with powerful buyers because they offer a distinctive cars, tracks and services that command brand loyalty, and only tey can supply them.This means that BMW must carefully manage costs across its entire production process from idea inception to delivery but particularly in those areas that are not directly related to the sources of differentiation (Mun 2010).Harrison & John (2009) argued that BMW’s differentiation strategy leads to increased sales only if buyers value the attributes that make the vehicles unique enough to pay a higher price for it, or if they choose to buy from BMW preferentially.Focusing exclusively on premium motors, BMW uses an international focused differentiation business-level strategy to sell its cars, tracks and motorcycles in multiple geographic regions (Hitt, Ireland & Hoskisson 2012).According to the company’s CEO, BMW relies in part on a host of strategic alliances to further shape BMW’s future, which involves topics such as technology leadership.BMW achieves good engineering design and high performance of its vehicles through product innovations and provision of superior quality and service.These factors are then sustained and leveraged through creative advertising, brand building and strong strategic alliances.BMW still serves a relatively wide range of the total market, but its motors are differentiated in the eyes of the customers who are prepared to pay a higher price for a BMW than for Toyota, Honda, Ford and Mazda.BMW has over the years pursued its competitive advantage through the differentiation, which means creating differences in motors or services that customers are willing to pay a premium price (Lane et al. BMW creates differentiation through multiple ways such as a reputable brand image, proprietary technology or state of the art product features and provision of outstanding service networks (Lane et al. BMW trades off cost leadership against differentiation.