Commoditization: Difference between revisions

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{{Short description|Process where unique economic goods become interchangeable in the eyes of consumers}}

{{Distinguish|commodification}}

{{Economic anthropology|Basic}}

In [[business]] literature, '''commoditization''' is defined as the process by which [[good (economics)|goods]] that have [[Value (economics)|economic value]] and are distinguishable in terms of attributes ([[Unique selling proposition|uniqueness]] or [[brand]]) end up becoming simple [[Commodity|commodities]] in the eyes of the market or [[consumer]]s. It is the movement of a market from differentiated to undifferentiated price competition and from [[monopolistic competition]] to [[perfect competition]]. Hence, the key effect of commoditization is that the [[Market power|pricing power]] of the manufacturer or brand owner is weakened: when products become more similar from a buyer's point of view, they will tend to buy the cheapest.

This is not to be confused with [[commodification]], which is the concept in [[Marxian economics|Marxist economic theory]] forof objects or services being assigned an exchange value which they did not previously possess by their being produced and presented for sale, as opposed to personal use.<ref>{{cite web |url=https://rushkoff.com/commodified-vs-commoditized/ |title=Commodified vs. Commoditized |accessdate=2018-11-13 |last=Rushkoff |first=Douglas |authorlink=Douglas Rushkoff |date=2005-09-04}}</ref> One way to summarize the difference is that commoditization is about proprietary things becoming generic, whereas commodification is about nonsaleable things becoming saleable. In social sciences, particularly [[Cultural Anthropology|anthropology]], the term is used interchangeably with commodification to describe the process of making commodities out of anything that was not available for trade previously.<ref>Appadurai, Arjun, ed. (1986). ''The Social Life of Things: Commodities in a Cultural Perspective''. Cambridge UP, Cambridge.</ref><ref>Greenwood, D.J. (1977). "'Culture by the Pound: An Anthropological Perspective on Tourism as Cultural Commoditization". In ''Hosts and Guests'', ed. V. L. Smith, pp. 129-139. Philadelphia: University of Pennsylvania Press.</ref>

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. (For example, see [[Xerox#Trademark]].)

According to [[Neoclassical economics|Neo-classical economic theory]], 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.

==See also==

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[[Category:Commodities]]

[[Category:Business]]