Why Product Variety May not Increase Market Share (Essay Sample)

Why Product Variety May not Increase Market Share
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Why Product Variety May not Increase Market Share
Companies are always trying their level best to control the market share, and one way of achieving this is by offering a variety of products to consumers (Rao, 2008). This strategy enables a company to meet unsatisfied buyer needs at a very low cost and risk. The bargaining power of vendors with retailers is known to increase when a company extends its product-line. Producing a variety of goods under one brand enables a company to utilize its excess capacity, raise the entry point of competitors and at the same time break the entry point of competitors (Mather, 2012). Insurance companies such as AIG have been successful when it comes to product variety and this strategy seems to be working for them. Despite the strategic advantages, the introduction of another product by the same company can sometimes lead to a reduction in market share due to self-cannibalization (Mather, 2012). The future profits of a company like Apple are likely to be hurt by the introduction of the iPod Mini.
Mather (2012) argues that offering too many choices can be detrimental to a company’s fortunes because some consumers may rush to buy a competitor’s product after getting confused by many choices. A company can appeal to a wide variety of customers by offering wide variety of products but it is good to remember that this strategy can backfire. Some customers can differ a purchase because of too many choices (Guerzoni, 2013). They find it difficult to decide whether a particular product is suitable for them or not. There is constant increase of offerings in the market as a result of competitive pressure. Examples of companies that sometimes confuse...