Customer Reviews

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

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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.

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.

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

The title of the book is an obvious eye catcher. That's why I bought it. However, not before long, it turned out to be a cookbook kind of a writing whereby the author cites a series of commoditization situations and then offers a flimsy solution on the basis of other companies' strategies. In other words, he takes different examples of commoditization and provides solutions to those situations with again the examples of companies who tried to attack the situation. Hence, there is no theory at all. Example problems solved by example strageies.

So, if you are a company facing a sort of commoditization situation, you should first go through the pages of this book, find your specific commoditization situation, and then read what other companies did when they faced similar situations. Explanations you will find will be shallow and won't tell you much. Also, yours may be a small company but stil you will have to pick among alternative strategies as those preferred by giant companies like Hilton Group, Wal-Mart etc. This is only to be expected as the solutions in the book are not based on any THEORY at all. "Take the example, try to use it, even if the company in question is a behemoth". This way the book becomes a useless list of many different strategies, more like a patchwork.

But the book suffers from an even more serious shortcoming: It draws on an inside-out approach to strategy. There is no CONSUMER in this approach. There is a list of war-game strategies to choose from and there are situations of commoditization. You are then advised to match your commoditization situation with the possible example solutions. Totally inside-outside. This approach is very very dangerous and I urge the reader to stay away from this book. You should stay away from it also because there is no beef in it. Even though the author keeps saying that the book is based on his "research", we do not know much about this so-called research. What is the methodology, coverage etc. It is based on very flimsy evidence and very shallow and sometimes incorrect description of relevant business cases.

Take for example his `Zarafication' concept regarding commoditization. The aouthor may have discovered Zara recently but Zara is a very old case for those (like me) who are in the garment retailing business. So, while the author thinks Zara is the behemoth and its strategy causes commoditization, these are not true. Zara's strategy is not a low-end fashion strategy as the author thinks. It is "fast fashion" strategy which changed the rules of the game in the industry. The author thinks that H&M is a defender vis-a-vis Zara, whereas the reality is that H&M is a lot more fearful competitor than Zara. Today it is more releveant to talk of H&M as the new game changer in the industry. If you look at Interbrand 2009 list, you will see that H&M is number 21 whereas Zara is number 50 in the best brands list. Also, had his research been a good research, he should have come across with another anti-commoditization example which is Primark in UK. I am sure the author has not even heard of them. I suggest he studies Primark case carefully.

At other places he is dead wrong in his examples. For example he suggests that in response to competition from various watch-makers, the Swatch Group (SMH) started making acquisition of new brands like Omega, Blancpain etc. Had he just looked at wikipedia, he would have learned that SMH, which already contained in its portfolio the said brands and more, was formed in 1986. Brands did not come as a response to commoditization. They were already in SMH's possession. I just wander how can a person come up and say "I changed the approach to business strategy" and does not even know what is now elementary knowledge in business strategy arena.

I decided to quit reading the book after 40 per cent of it was through. Because a book which lacks theory, which does not even understand the esence of strategy in today's environment, which is a cookbook with which you cannot cook anything and which is full of factual mistakes, makes you go furious. While the whole world of strategy is turning towards a more outside-inside approach, this kind of inside-outside centered poor writings should be avoided. I reccommend, instead, Adrian Slywotzky's UPSIDE and Mark Johnson's SEIZING THE WHITE SPACE. They are worth spending your time on. Forget this one, it is a very BAD book on strategy.

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.

Poor, incorrect, horrible. I really don't think this guy knows what he is talking about. I have only read it for one reason, school. Any why in god's name would a school want us to read this rubbish I do not know.

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.