Product differentiation increases the threat of substitutes by making a firm's current products appear less attractive than substitutes.

Question

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Product differentiation aims to make a firm's products stand out in the market and create a competitive advantage over other products. This reduces the threat of substitutes as consumers may perceive the differentiating features as more valuable and therefore have a higher willingness to pay.

Product Differentiation Increases the Threat of Substitutes by Making a Firm's