Cannibalisation as defined by thefreedictionary.com is “a reduction in sales volume, sales revenue of market share of one product as a result of the introduction of a new product by the same producer� (encyclopedia.thefreedictionary.com/cannibalisation). This effect, while being considered one of the significant problems with technological convergence has an unnoticed proactive effect. The ability to carry content, data, image and text into other forms so that it is accessible through several media is known as technological convergence (Cunningham and Turner, eds, 2002: 5). This merge paves the way to create new devices that encompass many roles.
Cravens, Piercy and Low (European Business Review, 2002: 257) discuss the notion of innovation and how this attributes to cannibalisation. It is the company’s desire to be innovative that opens the door for cannibalisation within their company. They consider innovation to be “central to modern competition� and therefore essential to maintaining market share. Therefore, convergence as a result of innovation leads to the creation of new products that possibly draw revenue from existing products. A current example includes the ability to burn music straight from the Internet to a CD by simply using your computer. This is considered inexpensive and a great (although possibly illegal) way to listen to your favourite music, however, slowly this will put record shops out of business. It is essential that management teams understand cannibalisation and how to ensure it is proactive for the company.
As a result of innovation, new products also bring companies new competition. If a company chooses to converge technological aspects of two or more products, they may be entering into a new market and therefore gain new competition. For this reason, companies need to be focused on customisation, which Hartley (2002: 56) states is a result of convergence. Through customisation, companies must ensure that new products are a result of a desire for proactive cannibalisation.
In defence of cannibalisation, the innovation that drives new product developments can have a positive influence on existing market share and company sales. Cravens, Piercy and Low (European Business Review, 2002: 257) continue to argue that proactive cannibalisation has the ability to increase company sales and requires management attention. Creating new products that may replace existing lines can lead to increased income for companies because the new products better suit their target market. Innovation affects consumers as readily as it does companies and products are constantly changing to keep up with demand. Companies that fail to realise the positive benefits of cannibalisation are at risk of losing market share. Cravens, Piercy and Low give the example of Encyclopaedia Britannica and its failure to acknowledge the electronic CD-ROM market. This robbed the company of a huge market.
Alison Costello 10:50, 29 Oct 2004 (EST)
