Final answer:
Differentiation strategy can be supported by compensation policies like skill-based pay and performance-based pay.
Step-by-step explanation:
In order to implement a differentiation strategy, organizations need to consider compensation policies that align with their strategy. These policies should reward employees based on their unique contributions to the organization's competitive advantage.
One type of compensation policy that could support a differentiation strategy is skill-based pay. This approach rewards employees for developing and utilizing valuable skills that set them apart from competitors. For example, a technology company may provide higher compensation to employees who have specialized skills in emerging technologies.
Another type of compensation policy that can support differentiation is performance-based pay. This policy rewards employees who achieve specific performance targets or exceed expectations. For example, a salesperson who consistently exceeds sales targets may receive higher commissions or bonuses.