The word commodification which describes assignment of economic value to something not previously considered in economic terms, is sometimes used to describe the transformation of the market for a unique, branded product into a market based on undifferentiated products.
These two concepts are fundamentally different and the business community more commonly uses commoditization (or commoditisation in English) to describe the transformation of the market to undifferentiated products through increased competition, typically resulting in decreasing prices. While in economic terms, commoditization is closely related to and often follows from the stage when a market changes from one of monopolistic competition to one of perfect competition, a product essentially becomes a commodity when customers perceive little or no value difference between brands or versions. 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. 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. Examples are counterfeit drugs and generic network services (loss of 911). Commodification (a word, 1975, origins Marxist political theory.) is used to describe the process by which something which does not have an economic value is assigned a value and hence how market values can replace other social values. It describes a modification of relationships, formerly untainted by commerce, into commercial relationships.
Commoditization (a neologism, early 1990s, origins Business theory) is the process by which 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 to perfect competition.
These two concepts are fundamentally different and the business community more commonly uses commoditization (or commoditisation in English) to describe the transformation of the market to undifferentiated products through increased competition, typically resulting in decreasing prices. While in economic terms, commoditization is closely related to and often follows from the stage when a market changes from one of monopolistic competition to one of perfect competition, a product essentially becomes a commodity when customers perceive little or no value difference between brands or versions. 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. 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. Examples are counterfeit drugs and generic network services (loss of 911). Commodification (a word, 1975, origins Marxist political theory.) is used to describe the process by which something which does not have an economic value is assigned a value and hence how market values can replace other social values. It describes a modification of relationships, formerly untainted by commerce, into commercial relationships.
Commoditization (a neologism, early 1990s, origins Business theory) is the process by which 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 to perfect competition.
No comments:
Post a Comment