Identify the two primary forms that the substitutes for bases of product differentiation can take.

 Although some bases of product differentiation, including timing, location, distribution channels, and service and support, have few obvious close substitutes, others have readily available substitutes. Substitutes for these bases of product differentiation can take two forms. First, many of the bases of product differentiation can be partial substitutes for each other. For example, product features, product customization, and product complexity are all very similar bases of product differentiation and thus can act as substitutes for each other. In a similar way, linkages between functions, linkages between firms, and product mix, as bases of product differentiation, can also be substitutes for each other. IBM links its sales, service, and consulting functions to differentiate itself in the computer market. Second, other strategies can be substitutes for many of the bases of product differentiation. For example, one firm may try to gain a competitive advantage through adjusting its product mix, and another firm may substitute strategic alliances to create the same type of product differentiation.

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