PRODUCT DIFFERENTIATION AND SALES PERFORMANCE OF SOFT DRINK MANUFACTURING COMPANIES IN PORT HARCOURT CHAPTER 1 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 manufacturing 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 manufacturing company, using Unilever Nigeria Plc as a study.
1.2 Problem Statement
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 manufacturing firms Port Harcourt
1.3 Purpose of the study
The purpose of the study will determine product differentiation and sales performance in manufacturing firms in Port Harcourt. The Specific Objectives are as follows
1. To determine the extent to which Product quality influences Sales performance in manufacturing firms Port Harcourt.
2 To ascertain the extent to which Product design influences Sales performance in manufacturing firms Port Harcourt.
3) To examine how product superiority enhances sales performance in manufacturing firms Port Harcourt.
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 enhances sales performance in manufacturing firms Port Harcourt?
ii) To what extent does Product Design enhances sales performance in manufacturing firms Port Harcourt?
iii) To what extent does product superiority enhance sales performance in manufacturing firms Port Harcourt?