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Leg Zero: Porter´s model explained. Force number One: Industry Rivalry (part III).

Monet knew about Product Differentiation.

Hope all is well and wishing you a beautiful week. This coming Friday is the beginning of September, one of my favorite months. It is the beginning of autumn!! Awesome!.

5-forcesporter mineI will like to recapture where we stand at the moment with Porter´s Model. Last week we started to learn about the first force of Porter´s Model, Industry Rivalry. Remember there are 5 forces or determinants of Industry competitiveness and profitability, and we are at the moment just covering the first petal. This week we will continue developing each of the key factors from the Industry Rivalry Force. Today we will enjoy learning about the variable PRODUCT DIFFERENTIATION.

Product Differentiation is one of the most important variables to consider when we are defining our business product. According to Professor Robert Grant, the more similar the offerings of rival firms, the more willing are customers to substitute between them and the greatest the incentive for firms to cut prices. Where the product of several firms in the same industry is virtually no existent or indistinguishable, we are in a commodity market. The majority of pure raw materials are commodities, such as raw sugar, crude oil, wheat, rice, coffee, the sole basis of competition is PRICE. The competition here is purely based on price.

By contrast, in industries where products are not commodities, but highly differentiated finished products, price competition is limited by the customer’s unwillingness to shift their purchases simply on the basis of small price differences. Products highly differentiated are anything else which is not a commodity or raw materials, such as cosmetics, pharmaceutics, restaurants, management consulting firms, services, etc. It is our purpose to differentiate ourselves the most in order to carry on with specific customers who are willing to pay our beautiful businesses. OK!.


Rival firms in the same industry can be attracted to destroy the same industry by competing on price when they copy each other´s value propositions.  And that is not good. It is our main purpose to find different market niches and different value propositions in order to profit better, otherwise, we will end up cannibalizing each other.

Also if you copy another business ideas, we will end up punishing ourselves for the long term. Sooner or later your clients will find out that you are a robber, and life will grant you a punishment in the future. Nevermind, imitation might cause you a hard pain when you will be discovered. The truth always comes out. I started my own company after more than 15 years of thinking about how to do it, and I have not built my premises in another business. I do not compete with anyone because I have my own background of experiences built in Central America. Life will be a boomerang for you if you steal other ideas or businesses, and will hit you the most where and when you least expect it. Even when I share these models with you, I always try to give a source or reference. The same applies to all the pictures shown on this blog, which does not belong to me either.


Monet Painting Sells for a Record $81.4 Million at Christie’s Auction

Let´s go to an example about product differentiation. Claude Monet (1840-1926) was a famous French painter who everyone in the world knows. He in between his friends Renoir, Bazille, and Sisley,  is one of the most famous Impressionists from the history. Last year, one of Monet´s Haystacks paintings collection was sold at Christie´s Auction for $81.4 Million Dollars. But if you read Monet´s biography, he and his friends were critiqued many years. He experienced years of frustration and hardship. He started to sell his art creation when he was around 50 years old. For many years before then, his paintings were not valuable by his clients. No one wanted to purchase Monet´s canvases. For more than two decades, Monet experienced bitter poverty, and Bazille helped him financially to overcome his gloomiest days.  Imagine, he was able to buy his famous Giverny house by the year 1890. It took him 50 years of his life to be ready to buy the house of his dreams.monet haystacks

Monet knew about product differentiation without knowing anything about strategy. He was deeply fascinated with nature and the effect of light, constant weather changes and climate natural variations (fog, rain, the wind, waters´flow, etc.). His different objects of affection reflected in his paintings such as the Haystacks, the Giverny gardens, Water Lillies, Cathedral of Rouen and Houses of Parliament are expressions of him, in how to create product differentiation about something which is the same.  He painted the same motifs over and over and over again, with different perspectives of different times of the day, seasons, types of weather, atmosphere and different chromatic colors. Monet was obsessed with the effect of light in his artistic creations, and he “created” differences of the same product over and over and over again.

Let me finish for today, with the specific Monet artistic collection of the Houses of Parliament-London Series. He painted more than 95 images of the Thames in his visits to London. His paintings are full of product differentiation. He and his friends disrupted the industry of painting then.   By the time he painted the Houses of Parliament Series (1900-1904) he was able to pay the luxurious and lavish Savoy hotel. He did not accept less than the freedom to differentiate his products. I believe, Monet was thinking in offering a unique piece of art to each of his clients. Despite the circumstances of his vision´s problems (he had cataracts). Enjoy his paintings.

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