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MT1 – Aspects of the Strategies for Managing Industry Evolution to be considered are:

·How can firms anticipate (the timing issue) the pressures for Commoditization?

According to Carpenter & Sanders (2008), commoditization is the elasticity of a product where the company has lost its ability to differentiate as well as diminished the product’s ability sell at a higher price. To me, this sounds exactly like perfect elasticity, which is the consumer’s ability to easily substitute a product in a response to an increase or decrease in the product’s price (Price Elasticity of Demand, 2018). I’m not entirely sure if there is a difference between commoditization and comparable substitution, i.e. product elasticity? Perhaps elasticity is specifically the measurement of substitution relative to an incremental change in price, whereas commoditization is specific to a company’s inability to charge a premium?

When anticipating pressures for commoditization, companies have two options available to them; Value-in-use approach and process innovation approach (Carpenter & Sanders, 2008). Value-in-use is a bundling approach, which we see with insurance companies where you can obtain additional services for an increase in cost collectively, however, the increase in cost as a bundle would be less than the collective cost if purchased individually. From my own experience, I have purchased a television, phone, and internet bundle for less than a television and internet bundle. As the consumer, I literally just never installed the phone but took advantage of the cheaper pricing. According to Coursaris (2006), consumers seek offerings that can help them obtain a desire or goal at a competitive price. For my example, my goal was really television and internet – not phone. However, because I received all three at a more favorable price, I saw the value in obtaining the bundle.

The second option, the process-innovation approach is really about improving operational efficiencies, whereby the company makes changes that reduce the cost of production. I would use IKEA as an example where they have completely cut out the assembly of furniture and passed that role on to the consumer, whereby reducing operating costs and pricing.

·How can firms respond to the pressures for commoditization?

When firms find themselves in a position to respond to market pressures driven by pricing and or competition, companies can leverage a market focus strategy or a service innovation strategy (Carpenter & Sanders, 2008). A market focus strategy is one where the company solely targets a very narrow segment of the market to serve as a specialty service or product. I will use WAG as an example for this one. WAG is a service provider that provides dog walking services, accessible via a mobile application. That is all the company does. They pair people with dogs with people who will walk them. You would think that they can also groom them or train them, but the service they provide is specific to walking dogs and walking dogs only. According to Vorhies, Morgan, & Autry (2009), market focus strategies are difficult for competitors to imitate and to predict, allowing the company using a market focus strategy to obtain superior profits.

References:

Carpenter, M.A. & Sanders, Wm., G. (2008). Strategic management: A dynamic perspective.Upper Saddle River, NJ: Pearson Prentice Hall.

Coursaris, C. (2006). Mobile Technologies and the Value Chain: Participants, Activities and Value Creation. 2006 International Conference on Mobile Business, 6(6), 349-5359. doi:10.1109/icmb.2006.35

Price Elasticity of Demand. (2018, January 29). Retrieved February 26, 2018, from https://www.investopedia.com/terms/p/priceelastici…

Vorhies, D. W., Morgan, R. E., & Autry, C. W. (2009). Product-market strategy and the marketing capabilities of the firm: impact on market effectiveness and cash flow performance. Strategic Management Journal, 30(12), 1310-1334. doi:10.1002/smj.798

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