A commodity is product or service that is difficult to differentiate and,as a result,becomes a natusal for cost leadership competition. Examples include building materials, many consumer electronics products, and many of the things we buy in supermarkets. Thomas L. Friedman, award-winning columnist and author,has addressed the issue of commodities in the current business environment in his new book, the world ls flat. One reason the "world is flat" is because any product or service that is a commodity will find its low-cost supply anywhere in the world -wherever there is the lowest cost. Commenting on indie's growth in outsourcing work from other countries, Friedman notes that the portion of work that can be digitized is a good candidate for outsourcing. He provides examples from the accounting profession (tax return preparation) and journalism (press releases,company reports);these activities are being outsourced to the low-cost supplier. The accountant or journalist instead provides value-adding services to the customer (such as tax planning, financial analysis, and naalysis). Some parts of the work are in effact "commoditized."
Other examples of commodities include personal computers (PCs), cell phones, and airlines. The PC industry, dominated by dell computer, has seen sales rise while profits fall. Dell manages to maintain its growth in profits and sales by moving successfully into new markets (CHina) and product lines (televieion sets and digital music players).