What do high-end fashion companies, the Razr, and Harley-Davidson have in common? All are, or have been, in a battle against commoditization in their markets.
Whether caused by a new low-cost competitor (such as fashion's Zara), new product innovation (such as the iPhone), or the introduction of multiple substitutes and imitators (such as Honda, Suzuki, Victory, and Big Dog motorcycles), price competition is always costly and sometimes even deadly. The conventional wisdom for fighting commoditization advises either cost reduction (without sacrificing margin for share) or increased differentiation (to maintain a higher end competitive position). But there is little advice on how to identify the root cause of commoditization, so that the very source can be eliminated, escaped, or in some cases, even used to advantage. Based on an in-depth study of more than 30 industries, in Beating the Commodity Trap author Richard D'Aveni reveals the three most common patterns that create 'commodity traps' deterioration, proliferation, and escalation and offers targeted strategies, beyond cost reduction or continuous differentiation, that companies have used to address these dilemmas successfully. For each of the three traps, D'Aveni shows how to: identify if the commodity trap is the cause of commoditization in your market (each of the three traps – deterioration, proliferation, and escalation – demonstrate different dynamics between falling prices and features/benefits to customers). With a simple diagnostic tool, managers can pinpoint which dynamics are present in their markets and identify the specific source of commoditization. You can: spot the trap before it damages your business; destroy the commodity trap; escape the trap; turn the trap to your advantage; and choose which strategy is best for your situation. Supported by a number of examples, this small practical book will give all managers the framework.
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