Beating the Commodity TrapHelps companies combat price wars and product-segmenting competition
Imitation is the sincerest form of flattery—except in business where commoditization can disrupt, erode, and destroy brands, companies, and even entire markets. In his new book, Beating the Commodity Trap: How to Maximize Your Competitive Position and Increase Your Pricing Power, Richard A. D'Aveni, professor of strategic management at the Tuck School of Business at Dartmouth, warns that commoditization has never posed a greater threat than it does today.
“A commodity trap is where a company sees its competitive position being eroded so that it can no longer command a premium price in its market. Whether caused by a new low-cost competitor, new product innovation, or the introduction of multiple substitutes and imitators, this sort of competition is always costly and sometimes even deadly,” said d’Aveni.
By analyzing more than 30 real-life examples from companies including Dell, Harley-Davidson, Geico, Sears, and Zara, D'Aveni shows the three most common and damaging "commodity traps" companies can fall into: deterioration, where a low-cost competitor makes it next to impossible for a company to compete (like Zara did with high-end fashion companies); proliferation, where rival businesses create new price-benefit positions and fragment the dominance of a company's product (like Japanese and American motorcycle makers did to Harley-Davidson); and escalation, where lower-cost products are rolled out with new benefits at a lower price (as the IPhone did in mobile devices).
In his book, D'Aveni provides a framework to help companies develop win-win solutions to combat price wars and product-segmenting competition. In each chapter, he shares how proven commodity trap tactics works for a range of companies. "By improving their power over real prices, firms can actually beat their commodity trap rather than simply trying to outpace it," D'Aveni states.
Beating the Commodity Trap will help managers and business leaders to identify, escape, destroy, and use commodity traps to their advantage. D'Aveni also makes it easy for readers to choose the strategy that is right for their situation and cope with evaporation—when demand declines and over-supply and consumer hesitation leads to cost cutting.
D'Aveni was awarded the prestigious A. T. Kearney Award for his research and is a Fellow at the World Economic Forum in Davos, Switzerland. A frequent contributor to the Harvard Business Review, D'Aveni is the author of the bestseller Hypercompetition and most recently, Strategic Supremacy. He was chosen for the 2009 Thinkers 50 list of the world's most influential business thought leaders.
Founded in 1900, Tuck is the first graduate school of management in the United States and consistently ranks among the top business schools worldwide. Tuck remains distinctive among the world's great business schools by combining human scale with global reach, rigorous coursework with experiences requiring teamwork, and valued traditions with innovation. http://www.tuck.dartmouth.edu
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