Commoditization

Commoditization of an industry is considered high when competitors in comparatively stable industries offer increasingly homogenous products to price-sensitive customers, who incur relatively low costs in changing supplier. In other words, businesses facing high industry commoditization sell products whose core offerings are essentially identical in quality and performance to those of their competitors. Further, commoditized markets are relatively stable, as products are manufactured to a standard or fixed specification. In addition, rational factors govern customers purchasing decisions, resulting in high price sensitivity and low switching costs for customers. Research has indicated that commoditization is not limited to a single industry but rather constitutes a general trend pertaining to an increasing number of industries. Thus, commoditization appears to be a general phenomenon in marketing competition. For example, many high-tech industries currently face the challenge of commoditization as a steadily greater number of offerings from their component suppliers are undifferentiated, including computer memory, television parts, and disk drives