competitive strategy - competitive advantages in the market
how to make money buying companies with a competitive strategy A competitive advantage happens when a company has a way to compete in a market that is very difficult if not impossible for its competition to also try and compete in the same way. For instance some large retailing companies like Wal-Mart are very hard to compete with on price because they have such a tremendous amount of buying power. Big companies like Wal-Mart and Costco have a competitive advantage when it comes to price but this also comes at a cost in other aspects. Usually companies can only focus on one thing and companies like Wal-Mart don’t have a competitive advantage in convenience and service where other retailers like Ace Hardware have the obvious competitive advantage in this area for their customers. Depending on economic conditions people should invest in companies that have some advantage over their competition but it should also be related in some way to the current bigger picture i.e. the economy. If the economy is doing bad people will usually take price into consideration way more than if money is easy to come by, therefore companies that have price as their competitive advantage would be a better investment in general for bad economic times. In a better economy when price isn’t as much of a factor, then companies that focus on quality will in general be a better investment because people will demand more quality. This is not only the case for the retailing industry but also in manufacturing and other industries as well. I think that convenience these days should be looked at more when you are trying to find value in a company. Convenience is just one of those things that Americans especially, have always found to be very important in their purchases of everything from food, cars, to the clothing on their backs. Just think about fast food places and why so many of the people choose to use the drive thru instead of going inside the establishment. They choose this obviously because it’s more convenient than going inside and having to leave the comfort of their vehicle. Make sure as an investor that you are aware of the advantage the company has that you are investing in and be sure to think about how that advantage is working in with the economy as a competitive strategy . |