Corporate cannibalism occurs when one company releases a new product or service onto a market, in which it has already established a similar product or service. Essentially, this makes one offering that a company has a direct form of competition with another offering, sometimes even making a company its own biggest competitor. While this may seem like a flawed idea, it has become increasingly common and necessary as advances in technology make older pieces of hardware seem obsolete. A company can continue to produce one product that is popular and risk a competitor releasing an advanced product that replaces it, or engage in corporate cannibalism and release the advanced product itself.
Sometimes also referred to as market cannibalism, the idea behind corporate cannibalism is largely based on the need for some industries to perpetually innovate. There are some businesses that are fairly immune or not likely to deal with this issue, which usually includes those that provide a service rather than a product. In terms of product manufacture and distribution, however, there are numerous occasions that can require a company to engage in one form of corporate cannibalism or another. The rather evocative name for this practice comes from the idea that a company is essentially “eating” its own place in the market in order to introduce something new.
A simple example of corporate cannibalism at work can be seen in the practices of smart phone manufacturers in the early 21st Century. Smart mobile phones quickly became a highly competitive market, in which multiple manufacturers were putting out new models on an almost yearly basis. One manufacturer might introduce a new phone model at the beginning of the year, and within six months a competitor could release a model with similar or slightly better options. In order to compete with the product released by the competitor, that same company might often release another model the following year.
This practice is not inherently cannibalistic, depending on the nature of the market. The smart phone market did create a field rife with corporate cannibalism due to the way in which older phones remained popular. A company that releases a new model one year is likely to have that model be in direct competition with the one it released just the previous year.
The company has likely engaged in corporate cannibalism and is potentially eating into its own profits and success. Some potential downsides to this practice are the chance for the new product to reduce sales of the older one, or for people to not buy a product and instead wait for the “inevitable” upgrade that the company will release. This practice remains popular, however, since the alternative could mean hesitation and the release of a superior competing product by another company.