Question

Details the term Cannibalization, identify two corporations that have dealt with cannibalization and what steps were taken to overcome the cannibalization. Please provide any citations and references. Please be articulate in your responses

Answer 1

Cannibalization is a an externality where new business opened by the company eats into the existing business. For example-

1. IPad model sold by Apple cannibalized MacBook Air laptop sales.

2. GAP opened new store which is closed to existing store.

Steps taken to overcome cannibalization

• Sometime companies need to launch new product in the market to capture the market before the competitors do it. It may sometime result in cannibalization of existing product company is selling.
• The response to cannibalization depends on the situation company is in. If the company is launching product with usage similar to existing one like iPad and MacBook. In that they can differentiate the product by price, usage, features so as to put it in different segments.
• In the case when company is launching upgraded version of the existing product. In this case company need to be clear about launch strategy.
• They need to be clear about the launch schedule so that customer and marketing staff knows that product is coming and they both can devise purchase and sale accordingly.
• Another way to sale existing product with free upgrade option. Third one is to sale the existing product at discount to new product.