Q.Explain the meaning of ‘commoditisation’ with the help of examples.

Commoditisation

Commoditisation is the process by which goods that were once unique, differentiated, or brand-dependent become standardised and interchangeable in the eyes of consumers. When a product becomes commoditised, buyers make purchasing decisions based primarily on price rather than brand loyalty, features, or perceived quality differences.

This happens when competing products in a market become so similar that consumers see little meaningful distinction between them. The result is intense price competition, shrinking profit margins, and reduced ability for any single firm to command a premium.

Examples of commoditisation:

• Personal computers: In the early days, brands like IBM and Apple offered distinct experiences. Over time, as components became standardised and assembly straightforward, PCs from different manufacturers became largely interchangeable. Buyers now often choose based on price and basic specifications rather than brand prestige. …

When a product first enters the market, it often carries distinctive features, brand identity, or technological advantages that set it apart from competitors. Commoditisation describes what happens when those differences erode over time. The product becomes generic, indistinguishable from rival offerings, and consumers no longer perceive meaningful variation between brands. At that point, price becomes the dominant—often the only—factor driving purchase decisions.

This transformation typically unfolds as markets mature. Early innovators enjoy a period of differentiation, but competitors reverse-engineer features, patents expire, and manufacturing processes become standardised. What was once special becomes ordinary. The product shifts from being valued for its unique qualities to being treated as a basic commodity, much like wheat or steel, where one unit is functionally identical to another.

Consider personal computers. In the 1980s and early 1990s, brands like Apple, IBM, and Compaq offered machines with distinct architectures, operating systems, and capabilities. Consumers chose carefully based on compatibility, performance, and brand reputation. By the late 1990s and 2000s, however, most PCs ran Windows on Intel processors, used similar components, and delivered comparable performance. The market commoditised. Manufacturers competed fiercely on price, margins collapsed, and many once-prominent brands either exited or merged. Dell thrived briefly by optimising cost and distribution, but even that advantage faded as the entire category became a low-margin commodity business.

Mobile phone services offer another clear example. Early mobile networks were expensive, exclusive, and varied significantly in coverage and quality. Providers could charge premium rates because alternatives were limited. As infrastructure matured and regulation increased competition, voice calls and text messages became standardised services. Networks offered near-identical coverage and quality. Consumers switched providers freely, chasing the lowest price or best data bundle. The service itself commoditised, forcing telecom companies to seek differentiation through bundled content, customer service, or ecosystem lock-in rather than the core calling product.

Agricultural products illustrate the concept in its purest form. A tonne of grade-A wheat from one farm is interchangeable with a tonne from another. No farmer can charge a premium based on brand; the product is entirely commoditised, traded on exchanges where only price, grade, and delivery terms matter. …