The Commodity Magnet
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The concept of the commodity magnet synthesis the manner in which industry dynamics can create customer value and destroy company value. the key dimensions in the model are:
- Price
- Cost to serve
- I When a company successfully innovates and markets a new offering it starts in the top right quadrant. Through its differentiation it can command a higher price. As the company is learning, it's costs of operation are also high.
- II A good way to enjoy pioneering advantages is to introduce the innovation to more customers (1) (a Product leadership strategy) and becoming the brand leader.
- III As a good market attracts more competition (2) (requiring a Customer intimacy strategy strategy), choice will be created for customers and prices will be forced down.
- IV When industry participants stop innovating and customers become more knowledgeable (3) (requiring a Operational efficiency strategy), the customers stops comparing and starts demanding. They now occupy the driver seat and will degrade competition in the industry.
