For most part of human history, the trading of commodities has played a dominant role in the development of economies around the world. The end of the first century B.C. saw a great expansion of international trade involving the Roman empire, the Parthian empire, the Kushan empire, the nomadic confederation of Xiongnu, and the Han empire according to The Metropolitan Museum of Art. Today, a wide array of physical commodities continue to play an important role in a country’s economic well-being. Some of these include chemicals, textile, energy (oil & gas), fertilisers, food & fibre, grains & oilseeds, metals and timber within an exhaustive list. The World Trade Organisation reports that iron and steel has been among the fastest growing export products of China, increasing by an annual rate of 73 per cent since 2002. Consequently, China overtook Germany as the leading exporter of iron and steel in 2007.
The homogeneity of commodities has forced commodities trading companies to rely heavily on price competition as reported in the Entrepreneur in 2007. For most companies, price competition might not be a viable long term strategy in the commodities trading sector.
Another challenge faced by commodity traders belies the fact that commodity trading activity is heavily dependent on the demand for its customers’ products and services; therefore volatility in the markets their customers operate in, creates volatility in the commodities trading market, indirectly. According to the World Trade Organisation report, the increased demand among developing countries for biofuels in 2007 pushed the price of cereals and vegetables oils up, leading to a 21 per cent expansion of food exports.
Brand differentiation becomes particularly important when dealing with homogenous products. As stated in March 2007 in the Federal Communications Law Journal on the Entrepreneur, price competition weakens as products become differentiated. Although business may be selling homogenous products, they can differentiate themselves through the quality of service or their unique selling proposition, among others. Different factors come into play when dealing with different sectors in the Commodities Trading industry.
StrategiCom’s experience in the industry, amassed from work done with commodities trading companies, provides us with specific industry knowledge and expertise to develop brand strategies for clients in different sectors. Our strategies are customised to help build strong and highly differentiated corporate brands for our clients in the face of the challenges of homogeneity and volatility in the Commodities Trading industry. A highly differentiated brand that is well-positioned also enables our clients to steer away from price competition, creating a sustainable business in the process.
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