In marketing,cannibalization implies to a reduction in the sales volume,sales revenue,or market share of one product as a result of the introduction of a new product by the same producer.
For example,when Coca Cola introduced a similar product,like Diet Coke,this new product took some of the sales away from the original Coke which was already doing well in the market.Cannibalization is a key consideration in product portfolio analysis.If company fails to understand the concept of cannibalization it would land in the "NO MAN'S LAND".After this blunder mistake of coke its whole investment for the diet coke went in vain.....!!!
A second common case of cannibalization is when companies, particularly retail companies, open outlets too close to each other. Much of the market for the new outlet could have come from the old outlet. The potential for cannibalization is often discussed when considering companies with many outlets in an area, such as McDonald's.
Company's management should be aware of the effect of cannibalization, as this could lead to under cover losses.So the new product launching strategies must be implmented after considering cannibalization.
In project evaluation----implies when new implemented project's benefit is calculated,the profit earned from the product or project must be reduced in accordance with the profit and sales loss of other existing project.
