Market Cannibalism

Market cannibalization, market cannibalism, or corporate cannibalism is the practice (on the part of a company) of slashing the price of a product or introducing a new product into a market of established product categories. If a company is practising market cannibalization, it is seen to be eating its own market and in so doing, hoping to get a bigger share of it.

Market cannibalism can be distinguished from corporate cannibalism: in the latter case the corporation is cannibalising its own market share.

An imaginary example of corporate cannibalism is one of an autocompany producing electrical vehicles. If EVs were simpler, cleaner, cheaper (on large scale of production), more economical and easier to build than the ordinar ICE automobiles, an EV would be much more competitive than all other automobiles produced by that company. Thus the share of EV could "cannibalise" the share of ordinary automobiles. This is a bad example, though as an EV is not comparable with an ordinary vehicle in terms of quality and costs of production. This example shows the complexity of the subject and the relationship of market or corporate cannibalism with market evolution.

Another interesting example is one involving a company achieving lower productions costs for a product produced in a socially evolved country than for the same product produced in a socially weak country. In this case lower production costs are easily achieved thanks to lower wages and social costs. This type of market and corporate cannibalism is one factor that makes it hard today in Europe for example to find any computer not produced in China. At the same time companies like Foxconn achieved not only low production costs, but also made it possible for innovative products to get on the market.

Yet another example of market cannibalization is of Coca Cola and its differing soda product line that include: regular coke, cherry coke, vanilla coke, coke zero, etc. Market cannibalization would be a customer getting tired of regular coke and choosing cherry coke to try. Coke still generated the sale of their product but lost a sale on regular coke, it kept the consumer by offering another product that suits their alternative tastes. In other words, companies make alternative products to help keep loyal customers.

An hypothesis is that by better controlling innovation as a reason for market and corporate cannibalism, higher wages and better social standards can be achieved for the whole market and corporation than those that can be achieved without innovation control.