Businesses live in a cycle of commoditization and decommoditization. For the uninitiated (this is, of course, not meant for B-School students/graduates), in simple words, commodity is something where the consumers won’t differentiate between products from different producers. The products would essentially compete on price and may be some more or less objective measures of quality. When a product is decommoditized, differentiation is built upon on the basis of say packaging, brand etc. So, wheat flour was pretty much a commodity in India, untill brands like Annapurna, Ashirwaad etc. came in and decommoditized the market. Now, the way we associate the proliferation of brands and differentiated products with new age and development of markets, I have been wondering over exactly what will be called developed?
Consider financial markets. When they are developing, the information is becoming more and more transparent. And hence, the informed investors (customers for financial markets, in some sense) will make decisions based on price and (presumably) some objective measures of quality (of the stocks, say). That takes us more towards commoditization.
So, on the one hand, in the markets of goods we are witnessing the decommoditization of products, and on the other hand in financial markets, there is commoditization.
Which market is developing really? Interestingly, now even the goods market is being characterized by increasing information with the customers. So, is it that we will see a wave of commoditization there? Would that be the real development? And what we are seeing in terms of increasing decommoditization is actually just a bubble.
What development would have taken place then in this period between the early days of commoditization and the expected future with commoditization? May be this – that in the earlier commoditized world, things were commoditized out of lack of choice. In the new commoditized world, things will be commoditized because of excellent choice and sufficient amount of relevant information.
In that sense then, financial markets started late, but have gone ahead of the goods markets.