Illuminating Organizational Processes Behind the Rising Phenomenon of Industry Commoditization

Abstract

The chapter examines direct and indirect firm-related drivers of industry commoditization, a rising phenomenon characterized by homogenous products, price-sensitive customers, and low switching costs in stable industries, which originated in diminished differentiation among firms in that industry (Reimann et al., Toward an understanding of industry commoditization: Its nature and role in evolving marketing competition. International Journal of Research in Marketing, 27(2), 188–197, 2010). The chapter complements previous marketing perspectives on commoditization by adding an organizational perspective. Firms operating in the same industry face similar environmental pressures that define the framework for legitimate social norms in the respective industry (DiMaggio & Powell, The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160, 1983). To achieve social legitimacy, firms comply with these pressures by adapting their structures, processes, and behaviors in a similar manner (Meyer & Rowan, Institutionalized organizations: Formal structure as myth and ceremony. The American Journal of Sociology, 83(2), 340–363, 1977). The author questions if converging firm structures, processes, and behaviors diminish differentiation among firms and result in industry commoditization. A quantitative empirical study conducted with 209 top managers and marketing executives from various industries sheds light on this question and further examines organizational impacts on institutional isomorphism, which represent indirect drivers of industry commoditization.