How thinking differently about customers leads to varying product differentiation: an analysis of automotive incumbents and new entrants

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Research on incumbents and new entrants examines companies’ competitive strategies and performance. However, differentiation strategies used by incumbents and entrants in the face of radical industry transformation remain partly unexplored. This paper examines how and why incumbents and entrants in the face of radical industry transformation deploy differentiation strategies in certain ways. Qualitative interviews with 33 automotive managers showed that incumbents and entrants in radical industry transformation pursue varying differentiation strategies. This paper argues that the two groups deploy different strategies as they think differently about their target market due to distinct culture, capital and talent constraints. Specifically, incumbents and entrants draw on different assumptions and beliefs about customers, leading to varying differentiation strategies.