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Beating the commoditization trend: a framework from the electronics industry

Eric G. Olson (IBM Global Business Services, Strategy and Change Practice, Downey, CA, USA)
Deepak Sharma (IBM Global Business Services, Strategy and Change Practice, Mountain View, CA, USA)

Journal of Business Strategy

ISSN: 0275-6668

Article publication date: 4 July 2008

Abstract

Purpose

The purpose of this paper is to show that some of the critical questions that top executives from electronics companies ask are not unique to their industry and, in fact, are the same ones that confront executives across a variety of industries and virtually all company sizes. Questions that address issues of product complexity and the breadth of product offerings, how to respond to competitive forces, and how to meet the challenges that come from shortened product lifecycles and shrinking the time it takes for products to ultimately reach the marketplace are all relevant across multiple industries. Still, the electronics industry is one that is experiencing an especially unprecedented degree of change spurred by the increasing complexity of end products, higher competitive intensity, and shorter time to commoditization.

Design/methodology/approach

The article provides the methodology and tool set needed to develop and assess a product portfolio map, determine changes needed to marketing and sales focus as well as future actions to take in order to sustain higher profitability and return on investments. It includes: definition of the key dimensions and characteristics of the six key zones for product, sales, and marketing; summary of product, marketing and sales focus by zone; key challenges and actions that an organization can undertake for each zone; and methodology to apply the framework and develop an actionable transformation roadmap. This answers key questions such as: Does the current coverage align with existing core competencies? Which zone has the most profitable products? If playing in every zone which business should be divested? If there is heavy emphasis on one zone what does it mean for M&A strategy? Where do the top 100 customers map in the framework? What looking at product and technology roadmap going forward, which zones do we start entering?

Findings

This article provides a framework that enables businesses to ascertain their current state and identify actions appropriate to achieve a desired future state. It provides insights that lead to an actionable transformation plan.

Originality/value

Most companies in the electronics industry are executing multiple strategies based on acquisitions, sales transformations, new product introductions, and cost cutting measures to deal with the situation. However, the success rate of these strategies leaves significant room for improvement at many companies. So what is the answer? As is often the case when many variables need to be considered simultaneously and the competitive environment is complex such as this, it is important to establish a structured way to approach the challenges at hand. In this case, the key elements to consider are the customer experience, the product portfolios, and sales and marketing competencies. Achieving the right level of interaction and focus among these elements is critical to achieving success. This article provides a new and insightful framework to enable a structured analysis of the multi‐variable system.

Keywords

Citation

Olson, E.G. and Sharma, D. (2008), "Beating the commoditization trend: a framework from the electronics industry", Journal of Business Strategy, Vol. 29 No. 4, pp. 22-28. https://doi.org/10.1108/02756660810886971

Publisher

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Emerald Group Publishing Limited

Copyright © 2008, Company