Commoditized Business - Ritvvij Parrikh Commoditized Business | Ritvvij Parrikh Humane ClubMade with Humane Club

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.

How to operate: In running a commodity business, there are three primary areas to focus on:

  • Owned Identity: Can you tell your story better than your competitors?
  • Owned Network: Are you the preferred choice for customers and employees alike?
  • Operations: Can you outshine your competitors in efficiency and effectiveness?

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



Links to this Evergreen Note

None yet