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I just hear word "Canibalization" somewhre. When I search this, I don't recieve any results I want. So Can you give me the answer?

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Market cannibalization refers to a phenomenon that happens when there’s a decreased demand for a company’s original product in favor of its new product. When cannibalization occurs, the business experiences losses not just in sales volume but also in revenue and market share. Due to cannibalization, some companies opt not to release their new products because they don’t want the market share of their existing products to decline.

Market cannibalism is also known as corporate cannibalism. When a company manufactures a new product or introduces a new service, the goal is to attract a few of their existing customers and a large number of new customers.

Unfortunately, things don’t always go as planned. Sometimes, the release of the new product into the market attracts a large proportion of its current customer base. Failing to increase the company’s market base results in corporate cannibalism.

For illustration purposes, consider Company ABC, which is known for making high-end wristwatches. In an attempt to increase its customer base and subsequent revenues, ABC decides to manufacture another line of products – belt fob watches.

The new watch becomes a hit among buyers, and the company sees a significant increase in its sales volume. However, it does not take long before the owners realize that sales of their original watches have taken a sharp fall. The reason? Their initial customers have stopped purchasing the older watch as they prefer the new belt-fob type

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As seen in the example above, cannibalization can cost a company a significant amount of revenue. It often happens when the company fails to perform due diligence before launching their new product.

In some instances, the new product does not only hurt a company’s sales volume and revenue. The worst-case scenario is that the original product gets phased out of the market entirely.

However, a business can intentionally cannibalize its existing product with a new one. However, why would a company introduce a new product line knowing very well that it’s going to jeopardize the existing one? As a strategy for growing and expanding its operations.

Assume that ABC, the watch-making company, has been producing luxury watches for a while. However, for some reason, the watches don’t appeal to the intended target audience. Instead of producing a completely new product, the company decides to tweak its existing lux watch. The improvements are meant to attract the same consumers in the market.

In this case, ABC deliberately launches a new line of watches because it aims to retain its current customers, as well as attract new ones

There are certain situations where market cannibalization cannot be avoided. For example, we now see tons of department stores that now operate as online businesses, as well. The store owners already understand the risk that its online sales can jeopardize those of its brick-and-mortar stores.

A good example of a company that uses corporate cannibalization to its advantage is Apple Inc. When the tech giant invents a new iPhone, it doesn’t shy away from releasing it into the market. In fact, it ensures that their newer version is available in all their chain stores.

Obviously, it causes the sales of their older iPhones to drop significantly. However, Apple makes up for this loss by capturing its competitors’ current customers, hence increasing its client base.

In addition to Apple, Amazon is another company that has dealt with cannibalization very smartly. It runs an online retail company where consumers can purchase different goods. However, at the same time, it also runs a chain of stores known as Amazon Go.

Do sales of Amazon’s physical stores cannibalize their online operations? No. That’s because Amazon Go only trades in products that cannot be sold on their site, specifically, freshly-prepared meals.

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