Answer:
Geographical area
Step-by-step explanation:
Product differentiation which is based upon different functionality is referred to as Horizontal differentiation.
Product differentiation refers to a mechanism whereby a manufacturer makes his product unique and slightly different from similar products offered in the market by competitors. Such an attribute helps a customer in product identification.
Product differentiation can be achieved by different packaging, changing product appearance, product quality or added functionality.
Horizontal differentiation takes place when products which belong at the same level differ slightly based upon different functions or uses they offer.
While a firm uses horizontal differentiation for it's products, it divides itself into subunits based upon functions , type of business and geographical area. It means each subunit focuses on it's own functions i.e the kind of differentiated products the sub unit shall produce, serving the requirements of a specific geographical area.