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Three Types of Product Differentiation

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(a) Identify two market structures in which product development and product differentiation is an important type of competition for firms operating in those market conditions.

(b) Provide examples of three types of product differentiation that could help make a firm in a particular industry more competitive.

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The solution identifies market structures where product development and product differentiation are used as competitive tools. The three types of product differentiation were also discussed. This solution is 388 words with seven references.

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The two market structures that use product development and product differentiation as their competitive edge are Oligopoly and Monopolistic competition.

Oligopoly is a market structure characterized by a small number of large firms that dominate the market, selling either identical or differentiated products, with significant barriers to entry into the industry (AmosWEB, 2012).
Industries which are examples of oligopolies include steel industry, aluminum, film, television, cell phone, and gas (2012).

A monopolistic competitive market has three fundamental characteristics: 1.) Many buyers and sellers, 2.) Sellers offer a differentiated product, each firm may have a tiny 'monopoly' because of the differentiation of their product, 3. Each firm may have a tiny 'monopoly' because of the differentiation of their product, 4. Firm has some control over price (Biz/ed, 2012), and 5.) Sellers can easily enter or exit the market ...

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