Chapter 4: Business-Level Strategy 123value for customers.^76 Overall, a firm using the
differentiation strategy seeks to be different
from its competitors on as many dimensions
as possible. The less similarity between a firm’s
goods or services and those of its competitors,
the more buffered it is from rivals’ actions.
Commonly recognized differentiated goods
include Toyota’s Lexus, Ralph Lauren’s wide
array of product lines, Caterpillar’s heavy-duty
earth-moving equipment, and McKinsey &
Co.’s differentiated consulting services.
Under Armour, Inc. is a fitness apparel
company which concentrates on high-tech
exercise gear for both on consumer and
professional markets. It recently surpassed
Adidas to become the number two sportswear
apparel brand in the United States by retail
sales. Although it remains far behind Nike,
which has long held the lead, Under Armour
has continued its strong growth by pursuing
a differentiation strategy. It has built an even stronger knowledge of its consumer base by
purchasing the nutrition and exercise tracking platforms MyFitnessPal and Endomondo.
MyFitnessPal has 120 million users (mostly in the United States), while Endomondo has
80 million users (mostly in Europe). In the 2015 Consumer Electronics Show in Las Vegas,
Under Armour unveiled UA Record, “a dashboard under which it hopes to unite its digi-
tal resources.” Although the acquisitions will continue to be operated separately, they will
help Under Armour in “developing a digital ecosystem which provides unparalleled data”
on potential customers. Through this information, it can further customize products for
those who are drawn to its brand.^77
A good or service can be differentiated in many ways. Unusual features, responsive
customer service, rapid product innovations and technological leadership, perceived
prestige and status, different tastes, and engineering design and performance are exam-
ples of approaches to differentiation.^78 While the number of ways to reduce costs may
be finite, virtually anything a firm can do to create real or perceived value is a basis for
differentiation. Consider product design as a case in point. Because it can create a pos-
itive experience for customers, design is an important source of differentiation (even
for cost leaders seeking to find ways to add functionalities to their low-cost products
as a way of differentiating their products from competitors) and, hopefully, for firms
emphasizing it, of competitive advantage.^79 Apple is often cited as the firm that sets
the standard in design, with the iPod, iPhone, and iPad demonstrating Apple’s prod-
uct design capabilities. Apple’s extremely successful new product launches and market
share captured with them has invited competition, the most significant of which is
Samsung. As described in Chapter 3, Samsung has some strong capabilities and thus
has become a formidable competitor. Although it largely imitates Apple’s products, it
also improves on them by adding features attractive to customers (i.e., imperfect imi-
tation).^80 Therefore, Samsung is partially differentiating from Apple’s unique (differen-
tiated) products.
The value chain can be analyzed to determine if a firm is able to link the activities
required to create value by using the differentiation strategy. Examples of value chain
activities and support functions that are commonly used to differentiate a good or ser-
vice are shown in Figure 4.3. Companies without the skills needed to link these activities
Bernhard Lang/fortune.com
Under Armour, a company in fitness apparel, has specialized in the
strong knowledge of its base customer. To re-enforce this focus it has
been purchasing fitness apps such as MyFitnessPal.