From Manuel Becerra Theory of the Firm for Strategic Management: Economic Value Analysis
(page 152)
Firms essentially manage resources to create value for customers in competition with other firms.
Two basic questions summarize a firm’s market positioning versus its competitors:
- Which customers does the firm target with its products and services?
- For the targeted market segment in which the firm competes, how are the firm’s products and services different from those of the competition as perceived by the customers?
The first question is basically an issue of market segmentation while the second one deals with product differentiation. Segmentation and differentiation constitutes the main strategic decisions of the firm with regard to its positioning in the market. They are key elements of marketing strategy, but also have broad implications for the entire organization and its competitiveness.
(page 156)
While market segmentation refers to how the firm deals with customer heterogeneity, product differentiation results from the contrast between the firm’s offering and that of the competitors from the perspective of the customers.