An evaluation of the role of Product Differentiation Strategy on Sales Performance.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

In an increasing competitive and dynamic business environment, every organization needs to identify, anticipate, satisfy and care for customers to maximize profit, meet the requirement of stakeholders and have competitive advantage. Every industry including bank has an underlying structure or a set of fundamental economic and technical characteristics which give rise to competitive forces. A firm can clearly improve or erode its position within an industry through its choice of strategy. Competitive strategy, then, not only responds to the environment but also attempts to shape the environment in its favour (Porter, 2005). The strategist must therefore seek to position his or her firm to cope best within its industry environment or to influence that environment in the firm’s favour.

Business strategy development is concerned with matching customers requirements (needs, wants, desires, preferences, buying patterns) with the capabilities of the organization, based on the skills and resources available to the business organization, leading to the issue of core competence (Holmes and Hooper, 2000). The pursuit of competitive advantage is at the root of organizational performance and as such understanding the source of sustained competitive advantage has become a major area of study in the field of strategic management (Porter, 2005, 2001; Barney, 2001). The resource-based view stipulates that the fundamental sources and drivers of competitive advantage and superior performance are chiefly associated with the attributes of resources and capabilities, which are valuable (Barney, 2006; 2001).

Performance is associated with a firm’s results. Performance indicated the performance of organizations and revealed the outcome of business processes and accomplishments and the success of meeting established goals (Zhang & McCullough, 2005). Jouirou and Kalika (2004) measured organizational performance by a subjective way including cost reduction, customer satisfaction, improved production, and the ability to innovate. Wu (2001) used efficiency, sale performance, customer satisfaction and relationship development to measure of firm performance.

Furthermore, the resource-based view provides an avenue for organizations to plan and execute their organizational strategy by examining the role of their internal resources and capabilities in achieving competitive advantage. Product differentiation is a positioning strategy that many firms use to distinguish their products from those of competitors. (Lamb, Hair, and McDaniel 2004).Product differentiation is pervasive in markets. It is at the heart of structural empiricism and it smoothes jagged behavior that cause paradoxical outcomes in several theoretical models. Firms differentiate their products to avoid ruinous price competition. Representative consumer, discrete choice, and location models are not necessarily inconsistent, but performance depends crucially on the degree of location of competition. With (symmetric) global competition, rents are typically small and market variety near optimal. With local competition, profits may be protected because entrants must find profitable niches (Anderson 2002).

A company’s physical product offering may be highly differentiated on features not provided by competitors in the same industry, some also differentiate their product on performance with basis on power, professional credibility etc. on the other hand companies may differentiate their physical product on attributes such as innovation, consistency, durability, reliability and reparability. In addition to differentiating the physical product, the image of the product can also be differentiated. The established image should convey a singular and distinguished message that will communicate the product’s main benefit and positioning.

Pearce and Robinson (2005) aver that differentiation strategies are based on providing buyers with something that is different or unique, that makes the company’s strategic positioning, product or service distinct from that of its rivals. Superior value is created because the product is of higher quality, is technically superior in some way, comes with superior service, or has a special appeal in some perceived way. In effect, differentiation builds competitive advantage by making customers more loyal – and less price-sensitive-to a given firm’s product/service. Additionally, consumers are less likely to search for other alternative products once they are satisfied. Hernant, Mikael and Thomas (2007).

Some of the differentiation strategies adopted by organizations to foster sales performance evolve around interplay of various elements of the retail mix. These include: offering quality products, wide selection, assortment, strategic positioning, after-sales-service, quality service, convenient location, parking space, attractive design and layout, conducive atmosphere, sales incentives, convenient operating hours, own branding/value addition and a one-stop-shop. Carpenter and Moore (2006). Economically valuable bases of product differentiation can enable a firm to increase its revenues, neutralize threats and exploit opportunities.

When emphasis is placed on activities such as research and development aimed at identifying and satisfying customer needs differentiation achieves the desired objective. To add to the above, the effect of differentiating a product may not necessarily be in terms of money or financial terms but also certain benefits that enhance the value creation process of the firm.  As globalization leads to more intense competition among telecommunication organizations, with increase in customer demands, these organizations tend to seek competitive advantage by producing products with more valued features, such as product quality, product flexibility or reliable delivery (Baines and Langfield-Smith, 2003). As such, a differentiation strategy would provide greater scope for these organizations to produce products with more valued, desirable features as a means of coping with such demands. This research work therefore, focused on how competitive advantage can be achieved through product differentiation strategy and ultimately, how it influences the performance of the organization in the telecommunication company, using Unilever Nigeria Plc as a study.

1.2      Statement of the Problem

Despite the need for firms to differentiate their products in order to create and sustain competitive advantage and the fact that competitive forces in the organization are determined by the degree of differentiation, little effort seem to be made by firms in this industry to harness the benefits associated with differentiating their products. Evans, (2005), view that the pace at which firms in Port Harcourt utilize product differentiation strategies to insulate their firms against competitors and to enhance profitability seem to be relatively slow as compared to that of firms in other Industries. In order to find answers to these problems, this study is to investigate or to determine whether or not there exists a relationship between sales performance and Product differentiation Globacom Nigeria.

1.3       Purpose of the study

The purpose of the study will determine product differentiation and sales performance in telecommunication firms in Port Harcourt. The Specific Objectives are as follows:

1.  To determine the extent to which Product quality influences Sales performance in Globacom Nigeria.

2.  To ascertain the extent to which Product design influences Sales performance in Globacom Nigeria.

3.  To examine how product superiority enhances sales performance in Globacom Nigeria.

1.4     Research Questions

The following research questions have been formulated and will be answered at the completion of this work:

i.  To what extent does Product Quality enhance sales performance in Globacom Nigeria?

ii.  To what extent does Product Design enhance sales performance in Globacom Nigeria?

iii.  To what extent does product superiority enhance sales performance in Globacom Nigeria?

1.5    Research Hypotheses

Here, certain questions are raised; the provision of answers to them will be controlling the idea of the research work. The questions pertain the crux of the matter and are statements of major problems to be encountered as the progress is made on the work. The questions, which are interdependent, include the following ones:

HO1:  There is no significant relationship between product Quality and Repeat Purchase.

HO2:  There is no significant relationship between Product Design and Sales growth.

HO3:  There is no significant relationship between Product superiority and profitability.

1.6       Scope of the Study

The general content scope of this study covers Product Differentiation and Sales Performance. The geographical scope is Port Harcourt in Rivers State of Nigeria.

1.7   Significance of the Study

Because of the complex nature of some firms, this study gives a comprehensive approach of firms employing Product differentiation usage in Globacom Nigeria. A thorough understanding and knowledge of the factors that have impact on Product differentiation are very useful in guiding eateries owners and managers to design and deliver the right offering and strategies. The study findings also provide the owners of the Organizations with an opportunity to further understand available Product differentiation that can be employed to boost sales performance.

This research project will therefore be of immense advantage or benefit to the management of companies, computers and other business organization using product differentiation. Hence, the theories and concept contained therein can be infused into their management system.

1.8       Definition of Terms

Product differentiation: A marketing process that showcases the differences between products. Differentiation looks to make a product more attractive by contrasting its unique qualities with other competing products

Sales performance: Sales performance is usually for a certain period of time the employee has worked.

Product quality: The group of features and characteristics of a saleable good which determine its desirability and which can be controlled by a manufacturer to meet certain basic requirements.

Product design: Product design as a verb is the process of creating a new product to be sold by a business to its customers. A very broad concept, it is essentially the efficient and effective generation and development of ideas through a process that leads to new products.

Market share: The percentage of an industry or market’s total sales that is earned by a particular company over a specified time period. Market share is calculated by taking the company’s sales over the period and dividing it by the total sales of the industry over the same period.

Repeat Purchase: The buying of a product by a consumer of the same brand name previously bought on another occasion. A repeat purchase is often a measure of loyalty to a brand by consumers and is often taken into account by marketing research professionals to evaluate a business.