WHEN A PRODUCT becomes easily interchangeable with other products of the same type, it is said to become a “commodity.” The process of a previously differentiated and specialized product becoming interchangeable is known as commoditization. While it is believed to increase overall economic efficiency, it can be difficult for individual companies to handle. Economic value and profits come from scarcity, whereas commoditization can curtail the potential for profit.
A famous example of commoditization is the microchip industry. While microchips started out as a specialized innovation ...
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