Commodity business

A commodity business sells a product that's functionally the same no matter which company makes it, memory chips, oil, wheat, steel, so customers buy on price alone rather than paying more for one company's version over another's. Without something else protecting it, a commodity business can't sustain higher prices or margins than its competitors for long; if one producer charges more, buyers just switch to a cheaper one.

Commodity businesses are usually the most cyclical, since prices and profits are set by the balance of supply and demand across the whole industry rather than by any single company's choices. A producer can turn a commodity business into a much stronger one by building a moat around it, a genuine cost advantage, a scarcity of qualified suppliers, or long-term contracts that lock in customers, turning what would otherwise be a price-only competition into something closer to an oligopoly.