Final answer:
A differentiation strategy enables a business to address the five competitive forces by lessening competitive rivalry, having brand-loyal customers become more sensitive to prices.
Step-by-step explanation:
A differentiation strategy enables a business to address the five competitive forces by:
- Lessening competitive rivalry by distinguishing itself: When a business differentiates its products or services from its competitors, it creates a unique selling proposition that sets it apart. This reduces direct competition and reduces rivalry.
- Having brand-loyal customers become more sensitive to prices: When a business successfully differentiates its products and builds a strong brand, its customers become more loyal. These loyal customers are often willing to pay premium prices for the unique features and benefits provided by the differentiated products.
- Increasing economies of scale: Differentiation can lead to increased market share and larger sales volumes, allowing the business to achieve economies of scale. This can lead to lower production costs and increased profitability.
- Serving a broader market segment: By offering differentiated products, a business can attract a broader range of customers. This can help the business tap into new market segments and increase its overall market share.