To what extent would a differentiation strategy be a better option than a low cost option for Aspire when entering China? (16marks)
A differentiation strategy is something businesses use to gain an edge over their competitors. In industries where multiple competitors produce similar products, managers will try to make their product unique in some way so that it stands out from the pack. A low cost option focuses on providing similar benefits to competitors, but at a lower price.
For Aspire to differentiate, they need to provide more benefits than their competitors for example strong levels of customer service, which therefore should enable them to charge higher prices. If Aspire pursued a differentiation strategy the distribution of the coffee should be exclusive, keeping a tight control over distribution to maintain an exclusive image. This being used to ...view middle of the document...
Differentiation can add value by pursuing a USP. This may be different design or different components or may be based on image and branding. The key to success is to reduce costs in areas which do not affect the uniqueness of the product and to identify the features that add value to the product without leading to significant increases in costs.
On the other hand, using a low cost option will mean that for Aspire, they will constantly have to look for ways to reduce costs to make themselves leaner in order to enable lower prices. With a large investment of £200 million, Aspire introducing a low cost strategy ensures that they don’t overspend and find many ways to reduce as much costs as possible.
For Aspire to be successful with a low cost strategy they must be able to deliver its coffee more cheaply than its competition e.g. Costa and Starbucks. This being through economies of scale, removing elements from the marketing mix or special relations with supplies e.g. by making distribution more direct. Low cost strategies can involve complex operations management schemes, outsourcing to third world countries, or limiting employee benefits like health care.
Overall, you can use both a differentiation strategy and a low cost strategy if you are creative. For example Southwest Airlines cut costs by only flying 737′s, eliminating reserved seats, and not serving meals, but also differentiated themselves by creating a fun experience for guests by performing stand-up comedy and jumping out of overhead storage bins. It shows that you don’t have to spend a lot to differentiate your product from the competition. However, to start off for Aspire when entering the market, with already having some major competition like Starbucks and Costa in China, differentiation will be a better alternative for Aspire, this ensure they can focus completely on their products itself, making them the best they can be rather than just making everything a lot cheaper, they need to make themselves stand out in the coffee market.