How industrial equipment manufacturers survive commoditization : A dynamic capabilities approach

This thesis examines the commoditization challenge faced by industrial equipment manufacturers, where product and service offerings lose distinctiveness leading to price-based competition and diminishing margins. This issue is particularly critical for mature and capital-intensive sectors like industrial equipment manufacturing. While prior research has explored market-level drivers and generic strategies, a gap exists in understanding the specific internal organizational capabilities required for firms to survive these pressures. This study aims to fill this knowledge gap by answering the following research question: How can industrial equipment manufacturers leverage dynamic capabilities to survive commoditization and sustain competitive advantage? A qualitative, inductive research strategy employing a multiple-case study design was selected to gather contextual insights. Empirical evidence were collected through semi-structured interviews with industry experts across three relevant incumbents actively engaged in combating commoditization. The data were systematically analyzed using qualitative methods, involving coding, theme development linked to the microfoundations of dynamic capabilities, and a cross-case analysis focused on how these firms utilize dynamic capabilities through the framework of sensing commoditization drivers, seizing opportunities to respond, and reconfiguring to escape from commodity traps. Key findings reveal that effective sensing relies heavily on customer intimacy along with formal environmental scanning, yet significant challenges exist in internally synthesizing and utilizing this information. Companies pursued differentiation through innovation, technology leadership, and servitization, but frequently face a disconnect between strategic intent and successful commercial execution. Modular product architectures were identified as critical enablers for agility and customization. However, they face substantial barriers caused by organizational inertia, path dependencies, and portfolio complexity. The findings highlight the crucial interplay between dynamic capabilities and identifies a “commoditization dilemma,” where rational short-term actions, may paradoxically accelerate long-term commoditization. This thesis provides empirical evidence on the practical application of dynamic capabilities in countering commoditization within the industrial equipment sector. Successfully surviving commoditization requires developing individual capabilities and managing their integration by actively overcoming internal rigidities. The research contributes to dynamic capability theory through contextualized insights into microfoundations and interplay challenges, and to commoditization literature by highlighting the paradoxical effects of certain strategic responses, emphasizing the need for a long-term perspective in capability deployment.