Production differentiation in the industrial markets for mechanical engineering: Supply factors

• Main Author: Natalya Yu. Yaroshevich
• Format: Article
• Language: Russian
• Published: Ural State University of Economics 2020-11-01
• Series: Управленец
• Subjects: differentiation; production differentiation; industrial market; mechanical engineering; specialization; economies of scale; generic strategy
• Online Access: http://upravlenets.usue.ru/ru/-2020/694

Amid the turbulence in the external environment, the issue of finding adaptive strategies is becoming increasingly relevant. This problem is especially acute in industrial markets. One of the most common strategies is differentiation. Numerous modern theories of differentiation rest on the distinctive features of consumer demand and often do not take into account the factors of product supply. These factors, however, serve as the basis for determining the generic development strategy of an industrial enterprise. The paper explores production differentiation and justifies the factors of supply affecting it. The theory of industrial organization, the theory of strategic management and the microeconomic approach constitute the methodological framework of the present article. General scientific methods of logic-structural analysis were used. The empirical base includes data from nine industrial markets for mechanical engineering in the Russian Federation. Having analyzed the theoretical approaches to substantiating the existence of production differentiation, we managed to identify its fundamental factors: specialization and the presence (absence) of economies of scale. To assess these factors, we propose using two indicators: the industry specialization coefficient and the indicator of absolute cost advantage. Matrixing industrial markets for mechanical engineering by the parameters “the level of industry specialization” and “economies of scale” allowed pinpointing three types of production differentiation and their corresponding generic strategies. In the presence of economies of scale and a narrow specialization, an enterprise should choose the strategy of “capturing a niche”; in the presence of economies of scale and a broad specialization, it should follow the strategy of wide differentiation. In the absence of economies of scale for broad and narrow industry differentiation, the generic strategy of a machine-building enterprise is competitive marketing. The author’s methodological approach to choosing the type of production differentiation is versatile and can be used to substantiate generic strategies of industrial enterprises.