When considering the impact of product differentiation on the threat of rivalry, product differentiation
A) reduces the threat of rivalry to zero.
B) increases the threat of rivalry by forcing each firm in an industry to compete directly with one another instead of allowing them to carve out their own unique product niche.
C) has no impact on the threat of rivalry.
D) reduces the threat of rivalry because each firm in an industry attempts to carve out its own unique product niche.

Question

Quizplus · Accepted Answer

Product differentiation reduces the threat of rivalry because each firm tries to carve out its unique product niche, which creates a barrier to entry for potential competitors. This differentiation makes it challenging for new entrants to attract customers away from established firms and forces them to incur significant startup costs to develop a unique product capable of competing in the marketplace. Therefore, product differentiation reduces the threat of rivalry.

When Considering the Impact of Product Differentiation on the Threat