Saturday, February 19, 2011

Hyundai’s Sonata and GM’s Malibu “Cannibalizing” Sales of Toyota’s Camry and Corolla? An Erroneous Use of the Word "Cannibalize"

You’ve probably heard about the increase in sales last year of some cars such as Hyundai’s Sonata, Ford’s Focus and Fusion, and GM’s Malibu, thanks to Toyota’s high-profile safety problems hurting the demand for Corolla and Camry. Last week--on February 8--I was disappointed to hear Nightly Business Report’s reporter extraordinaire Diane Eastabrook describe the situation as “Sonata has probably cannibalized sales from Camry” and “Malibu has probably cannibalized sales from Camry and Corolla.” This is an erroneous use of the term “cannibalize.” Before I explain why, let me point out that Diane Eastabrook is one of my favorite reporters on all of television because her presentations are tight, cogent, extremely well delivered, and gripping.

First, a bit of insight into the word “cannibalize.” As you probably know, to cannibalize is to eat one’s own kind. In a business context, cannibalization occurs when, in an effort to push a particular product, a company uses parts or resources meant for another product, thus letting the production/ sales of the latter suffer. Alternatively stated, a product is said to have been cannibalized when its marketer lets the sales of that product decline as a direct consequence of that firm pushing the sales of another of its products. So, for instance, if Nissan was facing capacity problems on its production lines and decided to divert some of the resources essential for the manufacture of the Maxima toward the production of higher-priced Infinitis, that would be a case of the company “cannibalizing” the sales of Maxima.

Summing up, Hyundai selling more Sonatas and GM selling more Malibus because of Toyota’s travails is nothing but a manifestation of the everyday competition in the marketplace. It’s simply a case of one company taking market share away from a rival firm, something that can arise because of a number of factors. To name just three: (i) the gaining product being superior, (ii) the losing product’s manufacturer acquiring a taint, (iii) a product shortage, because of manufacturing or distribution problems.

© Copyright 2011  V. J. Singal

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