Business Strategy Essays

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Thompson (2005) argues that differentiation adds cost in order to add value.

With differentiation, BMW achieves superior performance by serving its customers’ needs differently, ideally and uniquely (Thompson 2005).

The major risk associated with a differentiation strategy centres on the difference between added costs and incremental price.

Harrison & John (2009) noted that customers may not sacrifice some of the features, services or brand image possessed by BMW because it costs too much.

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.

Harrison & John (2009) established that although reliability and performance may be BMW’s primary focus, the company cannot ignore its cost positions.

When costs are too high relative to competitors such as Mercedes, Honda and Ford, the company may not be able to recover enough of the additional costs through higher prices.

This is a valuable asset that allows the company to charge a premium price (Hill & Jones 2012).

BMW is likely to experience problems with powerful buyers because they offer distinctive vehicles that command brand loyalty.

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