Market cannibalism and new product development
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.
Suppose that pet-food manufacturers A, B and C offer one line of tinned cat food each, and that the customers cannot really distinguish between them, thereby giving them 33.33% share of the market, each. Suppose that manufacturer C then launches a new labelling of cat food called D. On the face of it, it cuts the market share of product C from 33.33% to 25%, but in reality the manufacturer of C now has 50% of the market share, as opposed to 25% each for its rival manufacturers, A and B.
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.
This example shows the complexity of the subject and the relationship of market or corporate cannibalism with market evolution.
Yet another example of market cannibalization is of Coca Cola and its differing soda product line that include: