Uniqueness competition. The area labelled [b] is the realm of uniqueness competition (or differentiation). In contrast to the low-cost competition, there is generally more than one way to be unique. Companies 5, 6, 7 and 8 all have unique positions as indicated by them all being on the strategy possibility frontier. Think about companies with different advertising image, product development focus and/or customer service. (The diagram should ideally be represented in (n+1) dimensions. There are n dimensions of uniqueness and one dimension of low cost.)
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| Figure 1. |
A number of companies can happily coexist on the frontier since economies of scale is less important (but not unimportant). Since the companies on the frontier all appeal to different customer groups it is possible for many to coexist. This is a very different situation compared to the low-cost competition. However, not all positions are equally good. Companies 9 and 10 are not have as strong uniqueness so they will suffer unless they charge lower prices, which is just another way of suffering. To better understand Company 9 and 10, the who-what-how should be studied.
It is a challenge to remain on the frontier as effort towards uniqueness requires time. It is impossible to build a strong new product portfolio or a strong brand in just a few year. Continuous investment is necessary, which means that failure to invest (or wrong investment) can have negative consequences five to ten years later. Many industries are full of companies that have been on the frontier, but then lost its position. Company 9 and 10 could be examples of companies that used to be on the frontier but that has drifted downwards, or they could be examples of companies moving towards the frontier. The static view cannot tell the difference, but the analyst is likely to know if the company is moving up or drifting down.
Stuck in the middle. Company 8 is in an interesting position. It has spent more effort on generating lower cost. This might be a viable position, but Company 8 is always subject to being outdone on uniqueness by Company 5, 6, or 7. Company 8 might then be tempted to spend a little bit more effort on becoming lower cost. This would be a severe mistake as Company 8 would fully enter stuck-in-the-middle territory. Its uniqueness position would suffer and probably only a small amount of customers would appreciate the new position.
Changes in the frontier. Without technical change, the best Company 9 and 10 can hope for is to get close to the frontier. However, with technical change, the whole strategy possibility frontier can shift upwards. When this happened on the low cost side of the figure, there was a race. This is typically not the case for uniqueness, because there is no one dimension of uniqueness. It takes longer for companies to figure out the new dimensions of uniqueness through product innovation, branding, and/or customer service.
Examples. In the smartphone market, it is fair to represent Company 7 with Apple. Samsung as Company 5. This particular industry is littered with companies that did not make it very well at all. I will write more in a later posting.
In the US market for carbonated softdrinks, Company 5 and 6 could represent Coca Cola and Pepsi Cola. Despite a very similar positioning their are able to create a product that is seen as unique by the end-customer.
Dimensions of uniqueness. The figure collapses all dimensions of uniqueness into one overall dimensions. This is a simplification, which means that two companies located next to each other may or may not be very similar. There is no general list of uniqueness dimensions that is relevant for all product categories. Examples of uniqueness dimensions: exclusivity/status, customer service, workmanship, diversity of products, performance, materials used. The important dimensions for a specific product category has to be determined separately.
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