Homogeneous Goods - Definition & Example
What is Homogeneous Goods?
Homogeneous goods are the goods which are either physically identical or are viewed as identical in the eyes of the customers . Since the customer can’t differentiate one product from the other it becomes very difficult for a seller to compete on the benefits.
The homogeneous goods are perfect substitutes for each other and are generally sold in perfect competition. The seller competes on either price or availability. In perfect competition many buyers and many sellers are present so the profit margins are very less. Price is the most important factor along which the firms producing homogeneous goods compete. For homogeneous goods the process costing is an allocation system companies use to allocate cost. It is easier to use and flexible as it is based on process.
There are certain aspects related to Homogenous goods which are unique to them:
Opportunities
In the commodities market differentiating between products is very difficult but still few firms like reliance mart, Walmart, hyper city, etc. have done a commendable job by branding the commodities. These firms focus on creating differentiation through better service and quality products.
Challenges
Every one demand the same product for similar reasons and the seller is not able to differentiate the product. Also, the pricing strategy, promotions and distribution system needs to be same.
Example of Homogenous Goods
In commodities market vegetables, fruits, grains, oil, metals and energy goods are homogeneous goods. The buyers purchase doesn’t depend much upon the product as all are similar but more on the price. So if you are going to purchase 1kg of tomato than wherever you may buy it from, it will serve the same purpose.
Hence, this concludes the definition of Homogeneous Goods along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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