Answer: Differentiation provides customers with a product or a service whose characteristicsappear to be unique and are perceived by them as valuable. Differentiation is concerned with“how” a firm competes. Segmentation deals with “where” the firm competes in terms of targets(customer groups, localities, and product types). To implement differentiation, differenttechniques exist, but all techniques rely on a deep understanding of the identity, the needsand expectations, the location, the psychological and behavioral attributes of a firm’scustomers.Establishing a segmentation of the market and deciding a differentiation strategy areindependent in theory, because a firm may locate itself within a particular segment withoutachieving differentiation. However, the two concepts go hand-in-hand because thesegmentation step is a preparatory step in the differentiation decision, since it provides a toolto understand and classify customers’ characteristics, upon which differentiation is based.Moreover, by offering uniqueness in its products or services, a firm may inevitably targetcertain market niches.References: p248-24971. Does differentiation imply a focus strategy?Answer: Differentiation provides customers with a product or a service whose characteristicsappear unique and are perceived by them as valuable. A focus strategy is concerned withserving extremely well a segment of the entire market, for which a firm has a specificadvantage and the capabilities to be efficient and effective.