In the corporate jungle, a phenomenon similar to the animal kingdom plays out – Cannibalism.
While in the animal kingdom, cannibalism is a means for survival, in the world of business, shaped by human ingenuity, it takes on a more complicated form.
The Strategic Gamble
Picture this: A company has a well established product namely ‘Product A’. However, it takes a bold stride by releasing a new product ‘Product B’. The new product now eats away the market shares that were once dominated by Product A. This phenomenon is known as market cannibalisation, where a company’s own product competes and diminishes the market shares of its established counterpart.
It mirrors the natural order of the world where adaptation, innovation and strategy are crucial to survive in this cutthroat world of business. It is a strategic gamble where if executed correctly, can be a powerful tool that ensures the longevity and competitive nature of your business. However, failing to do so may leave the company in a precarious position in the market.
But how does this phenomenon unfold, what are the risks and rewards?
Welcome to the challenging avenue of business, where every strategy you make stands as a linchpin between your brand’s success and failure.
In 1942, the Austrian economist, Joseph Schumpeter, developed a theory of ‘creative destruction’ which aligns with the concept of market cannibalism. It underscores the importance in dismantling existing structures to ensure innovation which in turn helps pave the way of progress in the marketplace.
The Art of Strategic Evolution:
Understanding the timing and method of product cannibalization is crucial. Typically, a product undergoes four stages in its journey. However, implementing cannibalization at each stage has a distinct effect. It draws a thin line between rejuvenation and potential pitfalls for your product.
Cub Chronicles - Stage of Introduction
This stage is when your product is just an infant in the industry, where the primary objective is to raise awareness. However, introducing a new product at this stage is a substantial gamble. The introduction of a new product may cannibalize the sales of the original product, which is still in the process of gaining a significant foothold. This requires careful consideration as it can create potential brand confusion, affecting your image and standing in the industry.
Cheetah’s Pace - Stage of Growth
The product in this stage gains momentum and traction, experiencing increased sales and profitability. Which is why businesses need to tread carefully to ensure that the growth of the new product doesn’t come at the expense of the existing one. In this stage, it is imperative that one balances the success of the new product while the current product remains prosperous.
Lion’s roar - Stage of Maturity
At this point, the demand for the established product starts to saturate, signalling its maturity. Since the market for the established products starts waning, it signals a good time to introduce a new product which can inject vigour back into the brand’s demand base.
Phoenix’s flight - Stage of Decline
This where its once illustrious established product has started to face a decline in demand. A proactive and aggressive approach becomes absolutely necessary. During this stage, the primary focus is entirely on cannibalising the declining product and redirecting the attention of its consumer base towards a new brand offering. Market cannibalism here, will revitalise the brand and ensure it mitigates the declining product’s market share. The brand realises a seamless transition to a new phase of growth and relevance.
Apple’s cannibalistic evolution: Steve Jobs to Tim Cook
Market cannibalism, when not executed properly, has the potential to erode profits or even induce brand confusion. Kodak’s Funtime film and Coca-Cola’s Diet Coke, serve as cautious reminders of the risks also associated with cannibalising products which can lead to loss of market shares.
However, between these cautionary tales, stands a consumer electronics giant who has strategically wielded the art of market cannibalism to its advantage. Since its inception under the visionary leader Steve Jobs, Apple has embraced the strategy of pursuing self-cannibalisation in the market.
Jobs himself acknowledged that if someone’s going to challenge Apple, it might as well be by their own innovations.
This cannibalistic approach is evident in each of Apple’s new releases throughout the years. A conscious decision was made to compensate for the decline in sales of established products with the rise in sales from innovative additions.
However a shift has been observed under the current leadership of Tim Cook. The focus now seems to lean more towards incremental updates to existing products, signalling a departure from the cannibalistic approach that defined the era of Steve Jobs.
In the world of consumer electronics, a conservative strategy of protecting existing products or staying stagnant leads to a decline in market innovation and appeal. This is exemplified by the recent decrease in sales of the latest iPhone 15 which begs the question of whether Apple will wield cannibalism as a strategic tool again or try a different approach in this fruit fly industry.
Wisdom in the Wild: BRIO's Strategic Brilliance in the Corporate Wilderness
Corporate cannibalism, as a strategy, remains controversial. Its effectiveness depends on the finesse with which it is executed. The markets are very intricate and employing strategies to web through it requires a level of sophistication that can either elevate or jeopardise your business.
This is where BRIO, our AI dynamic pricing model, comes in. Its capability to turn every market instance into a data point showcases unparalleled intelligence. Brio doesn’t just decode the market, it evolves with it, providing you with real-time actionable insights from its continuous learning.
In this corporate jungle where the next strategy you take is the leap towards survival or demise, BRIO stands as a seasoned tracker with precision and intelligence, to ensure your journey through the jungle of business is guided with acumen and foresight.
Book a free demo of our automated retail solutions or contact our optimization experts at info@sciative.com.
To see how BRIO can empower your brand, ensuring it not only survives but thrives, visit sciative.com
