The business strategy of differentiation is particularly well suited for firms competing in commodity markets or the markets for basic items in which one firm's products are more or less indistinguishable from other companies' products.

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Differentiation strategy involves making a firm's products different from and more attractive than those of competitors. In commodity markets, where products are largely indistinguishable, competing on price (cost leadership) is often more effective than attempting to differentiate.

The Business Strategy of Differentiation Is Particularly Well Suited for Firms