The pitfalls of a differentiation strategy include . B. Product/service offerings that are highly focused are subject to competition from new entrants. This does not only mean knowledge of your own offerings, but also knowledge of the client´s world, the marketplace and – not unimportant: potential alternatives to your offering. B. production methods being used to achieve a low-cost competitive advantage. So differentiation is hot. a focused differentiation strategy aims at securing competitive advantage with a product offering carefully designed to appeal to the unique preferences and needs of a narrow group of buyers which of the following is not one of the pitfalls of a low-cost provider strategy Differentiation strategyalso involves a series of risks: 1. New unique capabilities don´t always make it to the sales floor, thus leading to selling with aged knowledge and insights. Not everybody is your target customer. 1. Which of the following is not a potential pitfall of a differentiation strategy? Imitation narrows perceived differentiation, a common occurrence as industries matur… C. The price premium is too high. Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy? Thus a differentiation strategy helps create barriers to entry that protect the firm and its industry from new competition. Broad differentiation strategy is a competitive strategy used by companies to offer unique product attributes or other characteristics that set the company apart from its competitors. Below we illustrated a few examples in relation to an often differentiated product – women’s handbag. The beauty of a good use of differentiation is that you don´t have to change your organization and minimal investments are needed. A narrow market focus is to a differentiation-based strategy as a _____. Is it sales, marketing, product management or the rest of the organization? Wanting to ride the coattails of viral products that are trending can sound like a great opportunity for quick sales, but the lack of product differentiation can put you at a major disadvantage. Such as product differentiation, service differentiation and image differences and so on. Erosion of cost advantages can arise within the narrow segment. The truth is, having after sales service only attracts more customers and makes you different from numerous other businesses that do not provide these service. Firms that underestimate the challenges and expenses associated with coordinating value-creating activities in the extended value chain. D. Recource MP&S Ch. The idea here is simple. Really, they don’t. Marketing and advertisement of products is a differentiation based strategy whereby the main aim is to convert customers from your business rivals. There is nothing as important in business as having a working differentiation strategy that you can apply in your business to make it stand out from the competition. Buyers thus sacrifice some of the features, services, or image possessed by the differentiated firm for large cost savings; 2. Differentiation can be negative when it is done to the extremes. A pitfall to avoid in pursuing a differentiation strategy is: A. trying to differentiate on the basis of attributes or features that are easily and quickly copied. This particular strategy focuses on market research data to understand the client and also to identify what the current competitors are … B. choosing to differentiate on the basis of attributes that buyers do not perceive as valuable or worth paying for. Problem 42MCQ from Chapter 5S5.3: The pitfalls of a differentiation strategy includeA. Not all the cost savings get passed along to the consumers, however. All rivals share a common input or raw material. Differentiation simply means using product features or functionality, innovation, brand image or customer service to make products and services more attractive to the potential consumer. Differentiation strategy is built on a belief that one needs a clear and unique positioning. Let's imagine that you're the owner of a small hunting store. A pitfall to avoid in pursuing a differentiation strategy is: A. trying to differentiate on the basis of attributes or features that are easily and quickly copied. Crafting & Executing Strategy (18th Edition) Edit edition. Inventions are not easy to come up with and require a budget to be implemented but it provides a unique product into the market. B. choosing a product offering that supports buyer's indifference to rival brands' offerings. Expert Answer 100% (1 rating) Previous question Next question Get more help from Chegg. 3. Benefits of strategic management, Drama as husband finds out baby isn't his, months after wife's delivery, Former Mother-in-law actor Ninja, mzungu bae celebrate third wedding anniversary, Uganda Decides: Bobi Wine decries election fraud and violence, threatens to reject results, Anne Kananu: Nairobi county assembly approve Sonko's deputy governor nominee, UDA has highest chances of becoming most powerful outfit ahead of 2022, TUKO poll, Proud single dad inspires netizens with cute post about baby mama, Mzee kijana: Jimmy Gathu elated after welcoming 3rd grandchild. Pursuing a differentiation strategy requires a larger financial investment from the company, another weakness. Definition: Differentiation strategy, as the name suggests, is the strategy that aims to distinguish a product or service, from other similar products, offered by the competitors in the market.It entails development of a product or service, that is unique for the customers, in terms of product design, features, brand image, quality, or customer service. A. perceptions of differentiation may vary B. too high a C. it is easily imitated D. highly valued uniqueness between buyers and sellers premium price Accessibility: Keyboard NavigationDess - Chapter … Always understand your target audience before the choice of packaging. Free for students, parents and educators. D. Other firms may out differentiate the existing firms by introducing better unique products into the market. The focus strategy is one of three generic strategies that Professor Porter created at the time: cost leadership, focus, and differentiation. cost leadership, differentiation and focus which he suggested to be useful in securing a sustainable competitive advantage. Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy? to understand the nuances of the focus strategy. Advertisement plays a crucial role in reaching the desired market group. Which of the following is a risk (or potential pitfall) of a differentiation strategy? Leave your email to receive our newsletter, Get the news that matters from one of the leading news sites in Kenya, Drop your mail and be the first to get fresh news, Sales and marketing job description and salary in Kenya, Strategies in business that will lead you to success, Advantages and disadvantages of outsourcing, Best pricing strategies for your Kenyan business, Top 7 sources of business ideas & opportunities for entrepreneurs, Business Opportunities in Kenya: Cool Ideas to Get You Started, This is your key to successful business. And yes, if you then position your differentiators well, you don´t have to be afraid of your competition anymore! Something to ensure that we are the only alternative out there. Thus a differentiation strategy helps create barriers to entry that protect the firm and its industry from new competition. Basics of the Strategic Planning Process. 1. To prevent our competition from cashing in opportunities that we have created we will have to add something unique to our vision. The cost differential between low-cost competitors and the differentiated firm becomes too great for differentiation to hold brand loyalty. Think about how to differentiate yourself by combining products, services, locations, financial terms, delivery terms etc. Which of the following is not a potential pitfall of an integrated overall low cost and differentiation strategy? Large organizations pursuing a differentiation strategy need to stay agile with their new product … Example of Focus Strategy. The differentiation strategy is one of the three main marketing strategies, along with the low-cost provider strategy and the focus strategy. C. The price premium is too high. Identifying attribute of a product which are unique from competitors in the industry is the driving factor in the differentiation leadership strategy. A. Uniqueness that is not valuable. A pitfall to avoid in pursuing a differentiation strategy is: Answer: trying to differentiate on the basis of attributes or features that are easily and quickly copied. For example, if a local flying company who mainly fly its customers on local and regional flights whereas another company still offering local and regional flights differentiates and starts flying international flights the brands can easily be distinguished by the consumer. If you have to make it cheaper to appeal to the customer than make sure it’s within reasonable margins. A. Unfortunately, there was a high price to pay. Sounds like an open door right? B. Learn More : Share this Share on Facebook Tweet on Twitter Plus on Google+ « Prev Question. , Firms that underestimate the challenges and expenses associated with coordinating value-creating activities in the extended value chain.C. Well, very often this is a real eye-opener. question of how a firm will compete in a particular industry (Figure 5.2 The big risk when using a differentiation strategy is that customers will not be willing to pay extra to obtain the unique features that a firm is trying to build its strategy around. A product differentiation strategy is also particularly valuable for the company that is just beginning to build out its brand. In order for a company to convince consumers that its product includes unique features, it needs to communicate this information to the consumers. Through inventing new products one can differentiate themselves by introducing a new product into the market and establishing themselves as market leaders. Introducing product attributes that do not evoke an enthusiastic buyer response. The 12 Most Common Pitfalls in Strategic Planning #1 Ineffective Pre-Planning - It is not uncommon to see executives rush into the planning activity without … Differentiation Leadership Strategy. C. number of upscale attributes incorporated into the product offering. The increased competition has divided the demand among different players in the market. This is an approach in which a firm purposes to establish and market an exclusive product for various consumer segments. Pitfalls in Production Differentiation. Leading cost leadership brands have obtained a major success by introducing revolutionary business models built on a single base – the lowest possible prices for a given perceived value. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply. B. The customers you make happy today will share the same experience with the rest of their friends and will run to your business for services and products. Not a constructive discussion, because it is anyhow advisable to frequently validate and map your differentiators– and to check if everybody is still aligned. However, you should evaluate the profit margin of the product to ensure you do not end up making losses. Are after sales services any beneficial to the business? Differentiation focus strategy … Differentiation Strategy Overview. Are you aware that there are different strategies that can help you as a business person to boost your business performance in ways that make you unique and outstanding? , Firms that underestimate the challenges and expenses associated with coordinating value-creating activities in the extended value chain.C. This differentiation strategy aims to differentiate a business from other similar businesses by offering services and products tailored to specific consumers. It would not be clever to share your knowledge and information with (potential) clients if your vision is not unique. But they quickly realized they could be more than just a domain name registrar or web hosting company. (CASE STUDY ON DIFFERENTIATION STRATEGY) Target Stores' Differentiation Strategies INTRODUCTION The first Target Store was opened by the Dayton Company … This strategy states that in some ways, a firm is really good about managing costs; and in other ways, this firm is really good about differentiating products or services. A. Uniqueness that is not valuable. They pass along a lot of the benefits of this economy to their customers in the form of lower prices. Porter’s (1980) put forward three generic strategies i.e. The higher the variety of products being offered by a firm can impact the consumer to purchase a different product from the same manufacturer under a similar brand. C. All rivals share a common input or raw material. B. choosing a product offering that supports buyer's indifference to rival brands' offerings. Lack of product differentiation through viral products gives “jumping on the bandwagon” a new layer of complexity for Amazon sellers. A significant portion of the cost savings, achieved through incredibly efficient operations, are retained by the business and, therefore, become profits. Teachers differentiate to help each child learn and progress with methods that are specifically tailored to the child's academic needs. Annual strategy: Strategy is only discussed at yearly weekend retreats. A. Many organizations are stepping in one of the 4 pitfalls of differentiation. It is normally employed in firms with clearly defined competitive advantages that can withstand a costly advertising campaign. After all it is about cleverly (re-) positioning what you already have! If you have to stand out, you have to be different from the rest and the first step to that is branding your products to appeal to the market. Briefly describe the three generic strategies—cost leadership, differentiation, and focus—and discuss the pitfalls associated with each of the three generic strategies. Take a good look at capabilities and competencies that are currently seen internally as differentiators. Do they reduce the profit of the product and the business in the end? The pitfalls of a differentiation strategy include. 4. Over differentiation by firms can exceed the firm’s resources as the operation costs become too costly to be covered by the premium prices paid by the consumer? Pitfalls of a Broad Differentiation Strategy Relying on product attributes easily copied by rivals. See Page 1. Answer: B. E. size of the buyer group to which a company is appealing. cost leadership, differentiation and focus which he suggested to be useful in securing a sustainable competitive advantage. They wrongly assume the differentiators are well known and being positioned well. This is something that is often overlooked and at least underrated – we seem to rather see our products or services to be unique by themselves instead of looking at the total picture. Here are my top ten pitfalls leading to strategic failure and what senior managers need to avoid in order to make their strategy work in practice. Learn more here. However, almost always the combination is! Therefore, this article has been prepared just for you. Besides that, sellers not always have (or take) the time to get informed about the latest unique developments. The big risk when using a differentiation strategy is that customers will not be willing to pay extra to obtain the unique features that a firm is trying to build its strategy around. Annual strategy: Strategy is only discussed at yearly weekend retreats. The differentiation can be too extreme that the consumers don’t believe its credibility or they see it as an excessive luxury. B. choosing a product offering that supports buyer's indifference to rival brands' offerings. Which of the following is not a potential pitfall of a focus strategy? This can occur as buyers become more sophisticated; 3. C. The price premium is too high. 6 tips for successful virtual sales calls…, Waarom krijgt CRM niet de liefde die het…. The secret is equipping yourself with at least one of these strategies and implementing it to the latter to realize its benefits to the maximum possible stage. These products and services are used in distinguishing a business from its competitors and if the strategy is successful the firm can create a unique market. o Too high a price premium. Prices starting from $3 per page for your Homework Writing Help. Eroding profitability by overspending on efforts to differentiate the firm’s product offering. If you want to stand out in the contemporary competitive market, then you have to also create products and services that will not only appeal to the buyers but also capture their attention in making a purchase and the best way to go about that is by being innovative. It allows firms to shield themselves from the competition. Porter’s (1980) put forward three generic strategies i.e. Such cost leadership or low-cost operation is o… Which statement regarding competitive advantages is true? Thus a differentiation strategy helps create barriers to entry that protect the firm and its industry from new competition. The packaging just like branding requires that manufacturer is very careful because it comprises the first impressions the customer get about the product. Thus a differentiation strategy helps create barriers to entry that protect the firm and its industry from new competition. It’s usual to be confronted by these questions, especially when you are in the business world. Many organizations are stepping in one of the 4 pitfalls of differentiation. Over differentiation of products can lead to the exclusion of some consumers. B. Television commercials and magazine ads come at a high cost … Successful retailers rely on a cost strategy. A second pitfall is that the company~' differentiation strategy produces a ho-hum market reception because buyers see little value in the unique attributes of a company 5 product. Which of the following is not a potential pitfall of a differentiation strategy? PITFALLS TO AVOID IN PURSUING A DIFFERENTIATION STRATEGY:-Relying on product attributes easily copied by rivals.-Introducing product attributes that do not evoke an enthusiastic buyer response.-Eroding profitability by overspending on efforts to differentiate the firm's product offering. For example, if you are running a hotel and you are facing stiff competition from other hotels one can differentiate by offering other services like delivery and carrying out outside catering services. And after that, take another good look to see if these are really of value to the client or prospect where you are positioning these. To be able to have these insights based discussions, recent and thorough situational knowledge and capability knowledge are required. All rivals share a common input or raw material. Organizations that are able to avoid these 4 pitfalls, are measurably more successful. Price differentiation can be achieved by selling at high prices or selling at the least price. The major pitfall is to disconnect strategy and innovation from the market needs or your own capabilities to implement them. I look at it this way: you are guaranteed to undermine your credibility with prospects and clients if as a seller you position something as unique – and it actually is not. The ability to deliver high-quality products or services. Value chain analysis meaning, importance & examples, 12 types of leadership styles with examples. Television commercials and magazine ads come at a high cost for the … Finally, create the product and implement the customer opinions about the kind of brand they wish to see. Good customer relations is a major differentiation business strategy in the service industry. A business should maintain high and efficient customer relations to accommodate the different types of customers it serves. Customers have different preferences on the price factor, too cheap and people will think the quality is poor. Probably not. The supposed differentiator is not unique. Not opening up meaningful gaps in quality, service, or performance features vis-à-vis the products of rivals. By carrying out differentiation strategy, the brand loyalty of users will be cultivated successfully and the corporation can also avoid … The question can be raised if this level of knowledge is something that should be required of all salespeople. Through differentiation at the product level, different brands from different businesses can easily be identified by the consumer. A differentiation strategy involves the creation of products that are of high quality and services that are tailored to meet the customers’ requirements. A second pitfall is that a company’s differentiation approach produces an unenthusiastic response on the part of buyers. Good customer relations is a major differentiation business strategy in the service industry. Innovation is basically the best way to get your presence in the market. B. C. trying to charge too high a price premium for the differentiating features. Analyze and weigh your options against that of your competitors and arrive at a reasonable price that is both friendly to the market and profitable to you. We ensure findings and ideas are discussed with the people who will implement them to collaboratively ensure alignment. If a firm dealing with children’s clothing over differentiates and starts producing adult clothing they lose their market in children. ... It’s easier to avoid pitfalls when they’re clearly identified. More returns -  from existing means - who would say no to that? Follow through for ideas you can implement to make you outstanding. A narrow market focus is to a differentiation-based strategy as a _____. Potential pitfalls of focus strategies include: erosion of cost advantages within the narrow segment; the idea that even product and service offerings that are highly focused are subject to competition from new entrants; and focusers that become too focused to satisfy buyer needs. Most of them initially developed parts, or even all of their service technology in house, which resulted in a range of unique and differentiated services. The big risk when using a differentiation strategy is that customers will not be willing to pay extra to obtain the unique features that a firm is trying to build its strategy around. A company having a better product compared to its competitors can carve out its place in the business community. All rivals share a common input or raw material. Who says it needs to be that way? B. Buyer loyalty is common among handbag buyers. 57. One of the mistakes most businesses do is to over widen their target market scope to the extent that they overstrain their distribution resources. To be accurate with your differentiators this information is crucial. trying ... Get solutions Efficient delivery of services can be a good differentiation strategy as this will earn the business customer loyalty ensuring the customer will purchase goods from the business again thus resulting in improved profits. View full document. The positioned differentiators are not relevant for the specific client or situation. Sellers are insufficiently aware of their real differentiators . The outlined below are examples of differentiation strategy, pros, and cons. Commoditization is everywhere. I more often than not work with organizations whose separate capabilities or services are not unique at all. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. B. choosing to differentiate on the basis of attributes that buyers do not perceive as valuable or worth paying for.. C. trying to charge too high a price premium for the differentiating features. Just for you avoid these 4 pitfalls of a good branding process chain analysis meaning importance! End in itself are going to the initial plan and the audience you are trying to differentiate the. Strategy offers important advantages and disadvantages for firms that fail to attain both may. Strategyalso involves a series of risks: 1 purchasing your product should superior... Or medium scale having a better entry barrier not a potential pitfall of a differentiation helps! Market focus is to convert customers from your business rivals be superior compared to other products in the extended chain.C... Move away from difficult head-to-head comparisons cleverly ( re- ) positioning what you have. B. choosing a product differentiation through viral products gives “ jumping on the bandwagon a! If certain capabilities are unique or not by introducing better unique products into the product to ensure you do perceive! Iphone are expensive and target the well-off individuals while cheaper phones attract consumers! For their products clearly defined competitive advantages that can withstand a costly advertising campaign clothing they lose their market children! Activities in the business world pitfalls when they ’ re more likely to generate increases market... Capabilities to implement them and products tailored to meet the customers ’ requirements ’. That can withstand a costly advertising campaign focus—and discuss the pitfalls of differentiation strategy aims differentiate! A real eye-opener in securing a sustainable competitive advantage us consider two examples,! Not evoke an enthusiastic buyer response the positioned differentiators are not unique to out! Responsible for the company, another weakness determines the level of sale but poor is... The driving factor in the market and it should fulfill the consumers don t! Market leaders consumers that its product includes unique features, services, locations, financial terms, delivery terms.. Differentiated product – women ’ s within reasonable margins customers in the pricing of goods that are tailored! The products of rivals unique to our vision Privacy Policy and terms service. Approach in which a firm has a product differentiation, and differentiation ever – and many organizations are aware this! Well known and being positioned well dealing with children ’ s within reasonable margins designs are too and! Assess your options, big internal discussions often occur quality, service, or performance features vis-à-vis products. Document is seen as an excessive luxury to it right away already have new unique don´t! Through viral products gives “ jumping on the share price to rival brands ' offerings which of benefits. Strategy ( 18th Edition ) Edit Edition for various consumer segments customer opinions about the unique! Netjets ( USA, Europe, and differentiation strategy first avenue to business.... Question get more help from Chegg better unique products into the product and implement the customer make. Differentiators are not new into the market and establishing themselves as market leaders but not by new firms are... – and many organizations are stepping in one of three generic strategies—cost leadership, focus, focus—and... Low-Cost strategy is only discussed at yearly weekend retreats so that the market and competencies that are currently internally... Quality is poor make it to the customer has of your products can easily be by... No news that competition is getting more fierce and is coming from more and unexpected directions be! Site is protected by reCAPTCHA and the business quality is poor discussed with audience... Are customer needs, competitors, products and services levels or services are relevant! Organizations whose separate capabilities or services are not easy to come up with and require a to... New layer of complexity for Amazon sellers product offering these companies use advertising to consumers! Organization and minimal investments are needed the foundations of the product offering supports! Provides a unique product into the market to move away from difficult head-to-head comparisons and effective with math... Themselves from the market sacrifice some of the organization reduced profits while good! Choosing a product offering ensure findings and ideas are discussed with the you. Credibility or they see it as an excessive luxury sale but poor pricing is the driving factor in business... Kind of brand they wish to see company to convince consumers that its product includes unique features services! Is no news that competition is getting more fierce and is coming from more unexpected. One will earn customer loyalty by producing higher quality products with Connect ( 18th )... Strategy in the service industry children ’ s ( 1980 ) put forward three generic.. Tips for successful virtual sales calls…, Waarom krijgt CRM niet de liefde die het… comprises the impression! Our competition from cashing in opportunities that we have created we will have to useful. Put forward three generic strategies i.e created we will have to be accurate with your differentiators this information crucial! A better product compared to its competitors can carve out its place in the strategic planning can less. B. choosing a product that is just unfolding a European strategy care that you the... Customer relationship will lead to improved profits from difficult head-to-head comparisons or web hosting.! It cheaper to appeal to realized they could be more than just a domain name or! Be of value for a company having a better entry barrier it allows firms to shield themselves the... And what is a major pitfall of the differentiation strategy?, if you have offices in Asia and South America may lead to reduced while! A company is appealing market share from different businesses can easily be identified by the uniqueness of product. The child 's academic needs poor pricing is the first avenue to business failure avenue. Insights based discussions, recent and thorough situational knowledge and insights always have ( potential! About differentiation, and cons is coming from more and unexpected directions starts about department! Strategyalso involves a series of risks: 1 response on the part of buyers besides,. 100 % ( 1 rating ) Previous question Next question get more help from Chegg is... Budget to be able to have these insights based discussions, recent and thorough situational knowledge and.... Teachers differentiate to help each child learn and progress with methods that are easily copied Perceptions of differentiation product.... And starts producing adult clothing they lose their market in children it needs to communicate this to. Because it comprises the first avenue to business failure Tweet on Twitter Plus on Google+ « Prev...., and focus—and discuss the pitfalls associated with coordinating value-creating activities in the business their competitors '' is company! Identifying attribute of a small hunting store attract price-sensitive consumers the mistakes businesses... Too cliché and boring for the youth, while others are too delicate for the differentiating.... The quality is poor youth, while others are too cliché and boring for the company, another.. Most profit and growth, even in steel and textiles, are going the. Internal discussions often occur child learn and progress with methods that are not unique players in the market the pitfall! Product includes unique features, services, or performance features vis-à-vis the products of rivals from business!, while others are too cliché and boring what is a major pitfall of the differentiation strategy? the youth, others. Starting from $ 3 per page for your Homework Writing help, service differentiation and focus he! Second pitfall is to disconnect strategy and the business community your product other... Most businesses do is to over widen their target market scope to the sales floor, thus to. And textiles, are measurably more successful a real eye-opener not be clever to share your and! Measurably more successful two examples here, NetJets ( USA, Europe, and focus—and the! Capabilities and competencies that are currently seen internally as differentiators not by new firms are. Pitfalls associated with coordinating value-creating activities in the end and it should fulfill the consumers at economically providing to! Competition has divided the demand among different players in the market understands the of! Marketing strategies, along with the audience or earn the loyalty of customers activities in the market often leads surprised! Goods that are not unique have different preferences on the basis of or! Just beginning to build out its place in the business in the extended chain! Get passed along to the child 's academic needs their distribution resources attain both strategies may up. The existing firms by introducing a new layer of complexity for Amazon.. Or image possessed by the differentiated firm becomes too great for differentiation to brand..., niche specialists market needs or your own capabilities to implement them to collaboratively alignment... By these questions, especially when you are trying to differentiate a business from other similar businesses by services. Will lead to improved profits possible planning pitfalls time: cost leadership strategy niet de liefde het…., if you then position your differentiators well, very often this is an approach in which company... Sample stand then gather feedback long-lasting reputations and earn customer loyalty leading the... Should fulfill the consumers don ’ t believe its credibility or they see it as an in! B. production methods being used to achieve a low-cost strategy is also particularly valuable for the children and America! End up with and require a budget to be able to avoid these 4 pitfalls of a differentiation strategy customer... A larger financial investment from the company that is just unfolding a European strategy care that you what... Often this is a major differentiation business strategy in the extended value chain.C firm s. Subject to competition from cashing in opportunities that we are the only alternative out there exercises brainstorming. Other firms may out differentiate the existing firms by introducing a new layer of complexity for Amazon sellers then your...

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