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Escaping the commodity trap – How to regain a competitive edge in commodity markets

2014

Almost all industries today are struggling with the increasing commoditization of their products and services. This is putting considerable pressure on prices and margins and leads to fiercer competition. And not only the mass market is being affected: even more complex and innovative products are subject to increasingly technical and qualitative standardization. The upshot is that new market players are getting more and more competitive while established providers are successively becoming interchangeable. This study by Roland Berger Strategy Consultants and the International Controller Association (ICV), entitled "Escaping the commodity trap", shows that 63% of the companies surveyed are already facing the commoditization of their products and services.

"Companies that focus on price competition instead of investing in innovation, added value and adjusting their business models will inevitably face steadily falling prices for substitutable products or services," explains Roland Berger expert Michael Zollenkop. "This means profit margins will continuously shrink, the industry will consolidate and many companies will fold."

While the standardization of products and services has been evident in the low-end and mid-market segments for some time, the premium segment is now being increasingly confronted with this situation: 20% of the surveyed companies are feeling the effects of commoditization on their high-end products.

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