Cannibalization
Categories: Company Management
Cannibalization really does derive from cannibals. Only grosser and more financial.
In a financial setting, it'd be like a company as a human would eat its own leg. Then arm. Then...other parts. Why would a company cannibalize itself? Because if it doesn't, someone else will.
Example: Cisco sells routers for $150 that cost it $50 to make. A Chinese competitor comes in with a cheaper product that is 80% as good but sells for $50. Cisco cannibalizes its margins by taking away a few features from the $150 router and selling it for $50 which is a superior product to the Chinese competitor but keeps its market share. Cisco will have cannibalized its profit margins in doing so. Oh well. At least legs are high protein when you're a trained runner like Cisco.
