Corporate Cannibalism
Corporate Cannibalism, according to Investopedia:
- An act of self-infringement upon market share by corporations through the issuance of new products
- Occurs when companies introduce new products into a market in which these products are already established. In effect, the new products are competing against their own incumbent products.
Is corporate cannibalization a waste of company resources?
John A. Quelch and David Kenny warn us in “Extend Profits, Not Product Lines” (Harvard Business Review Sep-Oct 1994) that introducing brand and product extensions can cause trouble when it doesn’t lead to more consumption, by a) confusing the customer; b) weakening the brand; and c) carting hidden costs that penalize the company’s profits.
On the other hand, Mathew Bishop warns us in “Essential Economics” that “Eating is people is wrong. Eating your own business may not be”. Why? Because some markets are ripe for innovation – markets in which a new product destroys the market for an existing product (Whatever happened to the type-writer? And maybe the video really did kill the radio star). According to Bishop, “the best course in action for successful firms that want to avoid losing their market to a rival with an innovation may be to carry out the creative destruction themselves”.
Eat or be eaten.
(This post was inspired by “Let’s Eat" – an article published in the February 2007 edition of Harvard Business Review).
- An act of self-infringement upon market share by corporations through the issuance of new products
- Occurs when companies introduce new products into a market in which these products are already established. In effect, the new products are competing against their own incumbent products.
Is corporate cannibalization a waste of company resources?
John A. Quelch and David Kenny warn us in “Extend Profits, Not Product Lines” (Harvard Business Review Sep-Oct 1994) that introducing brand and product extensions can cause trouble when it doesn’t lead to more consumption, by a) confusing the customer; b) weakening the brand; and c) carting hidden costs that penalize the company’s profits.
On the other hand, Mathew Bishop warns us in “Essential Economics” that “Eating is people is wrong. Eating your own business may not be”. Why? Because some markets are ripe for innovation – markets in which a new product destroys the market for an existing product (Whatever happened to the type-writer? And maybe the video really did kill the radio star). According to Bishop, “the best course in action for successful firms that want to avoid losing their market to a rival with an innovation may be to carry out the creative destruction themselves”.
Eat or be eaten.
(This post was inspired by “Let’s Eat" – an article published in the February 2007 edition of Harvard Business Review).
posted by Sgt. Pepper | 10:44 AM
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