What impact does a lack of differentiation have in a competitive market?

The impact of a lack of differentiation in a competitive market is that it increases the intensity of competition among suppliers. When products or services are perceived as nearly identical by consumers, suppliers are compelled to compete primarily on price rather than unique features or brand identity. This situation creates a scenario where businesses fight for market share by lowering prices, enhancing service, or finding other ways to attract customers, leading to increased competition.

Without differentiation, buyers find it easier to switch between suppliers, and companies must engage in aggressive tactics to maintain or grow their customer base. This intensified competition can also result in reduced profit margins for suppliers, as the default strategy becomes a race to offer the lowest price or the best value to consumers. In essence, the question highlights the direct correlation between lack of differentiation and heightened competitive dynamics in the market.