Commoditization
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In
goods that have economic value and are distinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market or consumers. It is the movement of a market from differentiated to undifferentiated price competition and from monopolistic competition to perfect competition. Hence, the key effect of commoditization is that the pricing power
of the manufacturer or brand owner is weakened: when products become more similar from a buyer's point of view, they will tend to buy the cheapest.
This is not to be confused with
anthropology, the term is used interchangeably with commodification to describe the process of making commodities out of anything that was not available for trade previously.[1][2]
Commoditization can be the desired outcome of an entity in the market, or it can be an unintentional outcome that no party actively sought to achieve. (For example, see Xerox#Trademark.)
According to Neo-classical economic theory, consumers can benefit from commoditization, since perfect competition usually leads to lower prices. Branded producers often suffer under commoditization, since the value of the brand (and ability to command price premiums) can be weakened.
However, false commoditization can create substantial risk when premier products do have substantial value to offer, particularly in health, safety and security.
See also
References
- ^ Appadurai, Arjun, ed. (1986). The Social Life of Things: Commodities in a Cultural Perspective. Cambridge UP, Cambridge.
- ^ Greenwood, D.J. (1977). "'Culture by the Pound: An Anthropological Perspective on Tourism as Cultural Commoditization". In Hosts and Guests, ed. V. L. Smith, pp. 129-139. Philadelphia: University of Pennsylvania Press.