Beating the Commodity Trap: How to Maximize Your Competitive Position and Increase Your Pricing Power

by Richard Anthony D'Aveni and Richard A. D'Aveni

Book Overview

Commoditization-a virulent form of hypercompetition-is destroying markets, disrupting industries, and shuttering long-successful firms. Conventional wisdom says the best way to combat commoditization is differentiation. But differentiation is difficult and expensive to implement, and keeps you ahead of the pack only temporarily. In Beating the Commodity Trap, Richard D'Aveni provides a radical new framework for fighting back. Drawing on an in-depth...

• Format: Hardcover
• Language: English
• ISBN: 1422103153
• ISBN13: 9781422103159
• Release Date: January 2010
• Publisher: Harvard Business Review Press
• Length: 224 Pages
• Weight: 0.35 lbs.
• Dimensions: 0.9" x 6.2" x 9.2"

Customer Reviews

How are you afraid of the Commodity Trap? Richard D'Aveni explains how to beat it

I was amazed by Beating the Commodity Trap. I believe that this book is differentiated from most other strategy-based books through 3 main factors. The book takes a long term orientation, provides a big picture view of competitive strategy, and explains the book's sophisticated methodology so well that business people can use it. First, the book is not concerned with short-term marketing ploys that boost profits and volume for the next quarter. Beating the Commodity Trap focuses on looking into the future. It provides tools that help predict the market in a 2-3 year time range, and focuses on the long term positioning of a product within the market as well as changes in customers' willing to pay for different product or service attributes. Second, providing tools that reveal the big picture is not an easy task. The book's price-benefit maps couple with a deep understanding of the industry reveals the big picture by showing strategic groups, trajectories of products, and provides the data to discern the motives of rivals. One of the book's outstanding achievements is that it demonstrates how to use price-benefit mapping and analysis in a large number of industries, including the hotel, restaurant, retail, apparel, ship building, consumer electronics, and motorbike industries. Third, I really appreciate that the author devotes considerable emphasis to explaining the methodology he uses. I found it a concrete and practical tool that plays with two key dimensions of a company's competitive advantage: product positioning and competitive manuevering. The author has very high credibility. He is a very respected professor and consultant who is able to simplify a complex challenge like commoditization and split it into 3 different types, bringing recognizable cases to solve the challenge of each scenario. I personally enjoyed the author's ability to take the perspective of several competitors simultaneously. In the Zara case, he not only explains Zara's well-known strategy, but he also reveals the less well known responses if its competitors, such as Hermes, Diesel and the Italian silk manufactures. In the restaurant industry the author explains how and why restaurants change their price-benefit ratio to offer better value to customers based on how customers are willing to pay for different cuisines, locations, and different levels of service, décor and food quality. While most managers guess about how much customers are willing to pay for these attributes of restaurants, the authors shows us how to quantify the dollar amounts they actually pay. I firmly believe that Beating the Commodity Trap enables executives to foresee and identify important marketing challenges that, when addressed using his suggested strategies, can earn significant price premiums for companies, in both manufacturing and service industries.

Do you really want the truth?...Excellent book for executives!--insightful, practical, fundamental t

Beating the Commodity Trap successfully develops a step-by step management decision making tool that faces this challenge. It has lots of great examples that inspire me on how to act boldly in the face of serious threats from imitators, low end discounters, and hypercompetitive innovative rivals. It is great that the book is not just for commodities, but also for companies being commoditized. The book is amazing and I personally like it for several reasons: 1. Clarity of purpose: The book is tightly focused on developing a managerial decision making tool, rather than developing theory. One of the great traditions in the strategy literature is the creation of strategy heuristics (maps and analytic tools) that help managers think through their strategic situation and make better decisions. In this case, the book teaches how to identify the underlying type of commoditization, how to understand the strategic dilemma created by each type of commoditization, and how to select among many possible strategies. 2. Clearly Targeted: The target audience is clearly focused on the general manager, marketer, strategic planner or consultant. But it is also extremely useful for executive Professors, like me, and also for those professors, disguising themselves as garment retailers. 3. Fast Read: It took me about 3 hours to read this book, a short airplane flight for me and most managers. And the book is designed so that the reader can skip eventually the parts that are not relevant to the reader's market situation. Consequently a manager can get to what she/he wants in less than an hour or so if they choose. The book gets to the point fast with tightly written and analyzed cases that don't get distracted by covering less-well known firms in world-wide industries. 4. Best Practices: The book provides many examples of firms successfully beating commoditization that inspire managers to action, give them justification for making changes in their strategy, and help them to understand when and when not to use the book's suggested solutions. Some of the more interesting best practice examples include--H & M on how to beat Zara and Swatch as an example of how to anticipate and preposition for commoditization using a multi-brand methodology versus a one-size fits all strategy. 5. Surprises: Beating the Commodity trap often takes well-known cases, such as Zara, and reverses the case by looking at the situation through the eyes of its rival. Rather than repeating well-known facts about what Zara is doing as a low-cost, fast imitator, it focuses on how other firms are trying to beat the challenges created by Zara. Do not miss the opportunity to read this book.

Insightful tool for navigating commoditization

This new book by Richard D'Aveni provides a high-level, strategic view of commoditization across many products, industries and geographies. His extensive network of CEO interviews offers lucid examples and D'Aveni has humorous anecdotes which make for an enjoyable read. It should be a useful reference for senior managers and management consultants as well as MBA students. I consider the qualitative aspects of D'Aveni's frameworks to be the most useful in establish the CONTEXT for a commodity situation. Are competitors escalating, proliferating or causing deterioration within a market? What stage of commoditization are you facing, what might be a likely progression and how should you pepare a counter-attack? The quantitative analyses appear robust, although would probably be somewhat to perform (eg. price-value regressions). A well-written book and useful addition to any business library! Highly recommended.

Strategies for resisting shrinking profit margins

Most businesses are caught up in the seemingly relentless commodity trap. Goods and services which once commanded a premium are now subjected to relentless price competition, and the squeeze on profit margins seems irreversible. However, if you can identify the type of commoditization which is occurring, there are actions which you can take to resist it, according to Richard D'Aveni in this book. There are three types of commodity traps: deterioration, in which the market heads towards low-cost/low-benefit offerings; proliferation, in which the market is filled with large numbers of different combinations of price and features; and escalation, in which the marketplace keeps offering greater benefits for the same or lower prices. The author explains how you can identify each of these traps, and the different actions that you can take to resist each one. The methods advocated by the author depend on creating accurate price-benefit analyses using hedonic price regression. I am not sure whether I am completely convinced about the scientific nature of this process; I fear that the plotting of price-benefit charts may involve too much guesswork and subjectivity. Nonetheless this short book provides an excellent source of different strategies for combating commoditization.

The people who read his book will have more market share...maybe yours

D'Aveni states today's obvious truth "Commoditization can happen to any firm. Any product, any time." What is not obvious is how to deal with this truth and the author does an excellent job of characterizing commoditization and provides good descriptions of strategies to combat it. The book does not (and should not) include specific plans of attack other than through example because the complexities of actually implementing the recommended analysis and selecting a response strategy require organizational and market context for your situation. Sometimes readers are looking for "the solution" or "the magic pill" for their specific problem and this book provides you the principles and basis of understanding to start down that path while avoiding fatal mistakes. The book does provide substantiated principles and a structure that can be used with your organizational and market context to beat the commodity trap. These principles are non-trivial, presented in an organized way and D'Aveni should be commended for providing this new framework. Here are some points/quotes I enjoyed from the book: a. "Once a company is caught in a commodity trap, differentiation is rarely enough to get it back out." b. In D'Aveni's experience "commoditization is usually the result of failure to act early enough" c. With regard to just discounting prices to battle the competition D'aveni states "This has the unfortunate and unintended effect of increasing the depth and severity of the commodity trap.' d. With regard to the organizational decision making process for dealing with commodity traps D'Aveni makes a statement that is tried and true for the price benefit analysis he is describing and any other kind of managerial decision process for that matter. "...it is important to get managerial buy-in for the selected definitions, sources, and measures of benefits and prices before...otherwise the decision making process can get deadlocked by those who refuse to accept the results due to denial, or the decision making process may be derailed by those who choose to play politics with the data to enhance their personal goals and power. If you are dealing with commoditization this book will provide a better understanding of your circumstances and better understanding creates better responses. Dr. James T. Brown PMP, PE, CSP Author, The Handbook of Program Management