Beating the commoditization trend: a framework from the electronics industry

Abstract

PurposeThe purpose of this paper is to show that some of the critical questions that top executives from electronics companies ask are not unique to their industry and, in fact, are the same ones that confront executives across a variety of industries and virtually all company sizes. Questions that address issues of product complexity and the breadth of product offerings, how to respond to competitive forces, and how to meet the challenges that come from shortened product lifecycles and shrinking the time it takes for products to ultimately reach the marketplace are all relevant across multiple industries. Still, the electronics industry is one that is experiencing an especially unprecedented degree of change spurred by the increasing complexity of end products, higher competitive intensity, and shorter time to commoditization.Design/methodology/approachThe article provides the methodology and tool set needed to develop and assess a product portfolio map, determine changes needed to marketing and sales focus as well as future actions to take in order to sustain higher profitability and return on investments. It includes: definition of the key dimensions and characteristics of the six key zones for product, sales, and marketing; summary of product, marketing and sales focus by zone; key challenges and actions that an organization can undertake for each zone; and methodology to apply the framework and develop an actionable transformation roadmap. This answers key questions such as: Does the current coverage align with existing core competencies? Which zone has the most profitable products? If playing in every zone which business should be divested? If there is heavy emphasis on one zone what does it mean for M&A strategy? Where do the top 100 customers map in the framework? What looking at product and technology roadmap going forward, which zones do we start entering?FindingsThis article provides a framework that enables businesses to ascertain their current state and identify actions appropriate to achieve a desired future state. It provides insights that lead to an actionable transformation plan.Originality/valueMost companies in the electronics industry are executing multiple strategies based on acquisitions, sales transformations, new product introductions, and cost cutting measures to deal with the situation. However, the success rate of these strategies leaves significant room for improvement at many companies. So what is the answer? As is often the case when many variables need to be considered simultaneously and the competitive environment is complex such as this, it is important to establish a structured way to approach the challenges at hand. In this case, the key elements to consider are the customer experience, the product portfolios, and sales and marketing competencies. Achieving the right level of interaction and focus among these elements is critical to achieving success. This article provides a new and insightful framework to enable a structured analysis of the multi‐variable system.

Customer relationship management and firm performance: the mediating role of business strategy

“…As the commoditization phenomenon grows more extensive (Olson and Sharma 2008;Rangan and Bowman 1992;Sharma and Sheth 2004), understanding performance drivers in the high commoditization environment and whether these drivers differ from those in less commoditized industries becomes increasingly important. From this research, we learn that industry commoditization may significantly affect the extent to which CRM enhances performance-improving strategies.…”

“…We consider commoditization to occur when competitors in stable industries offer increasingly homogenous products to price-sensitive customers, who incur relatively low costs in changing suppliers. Researchers have demonstrated that commoditization is not limited to a single industry but rather is a trend occurring in a growing number of diverse industries (Olson and Sharma 2008;Rangan and Bowman 1992;Sharma and Sheth 2004). For this reason, the question of how companies can successfully compete as their environment becomes commoditized has high practical relevance.…”

Toward an understanding of industry commoditization: Its nature and role in evolving marketing competition

“…We further elaborate on this categorization in our data analysis. Olson & Sharma, 2008;Rangan & Bowman, 1992;Sharma & Sheth, 2004), a commonly accepted, comprehensive conceptualization of this phenomenon is still missing. Drawing from our in-depth field interviews and a synthesis of prior research, we derive four distinctive aspects of commoditization (Fig.…”

“…Previous 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 (Greenstein, 2004;Olson & Sharma, 2008;Sharma & Sheth, 2004). Thus, commoditization appears to be an important phenomenon in evolving marketing competition (Heil & Helsen, 2001;Unger, 1983).…”

“…Marketing scholars have increasingly emphasized one particular phenomenon as a critical factor in evolving markets: the commoditization of industries (e.g., Olson & Sharma, 2008;Sharma & Sheth, 2004;Ulaga & Chacour, 2001). Preliminarily, we consider commoditization as occurring when competitors in comparatively stable industries offer increasingly homogenous products to price-sensitive customers who incur relatively low costs in changing suppliers.…”