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Commoditized Business

Commodity businesses are businesses without Competitive Differentiation and tend to have low pricing power, slim margins, and a crowded, competitive field. For example, editorial products.

In economics, two products are on the same indifference curve when consumers are indifferent to their differentiation.

Why it matters: On the bright side, if you intrinsically understand them, then they can become a solid foundation to earn capital and cashflow because:

  • They’ve a low barrier to entry making them easier to start.
  • There is already an existing wide customer-base. Hence, it becomes a question of standing out. Such markets tend to support many adequately sized businesses.
  • Finally, if there isn’t much of a competitive differentiation, then customers tend to stick to whoever is habit-forming and matches their sensibilities.

Success in commoditized businesses is about being at the edges (not normal) and then focus on execution.



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