Published in El Pais, February 1st 2020.
The other day my children were watching a video where it was explained that in Coca-Cola there are only two people who have access to their famous soda recipe. Although I doubt that the story is true, Coca-Cola does have a secret recipe. Patenting the receipe would only have offered protection for seventeen years, their ‘keeping it a secret’ strategy remains in force for more than 125 years. Each business must have some advantage that helps the company achieve its objectives. One of the most important goals is to make and earn money. I will not repeat Porter’s five forces, but I will mention my favorite strategies for a business to have a competitive advantage. The key to this is to do something better than the competition and thus achieve a better price.
My favorite strategy is complexity. If your product is complex and needs a combination of much knowledge, both in design, production and sales; You already have a barrier for other companies to think twice before doing the same. So, if you have the knowledge and the ability, this is your way.
Strategy number two is the brand. In general, consumers buy faster a product that they know and that is famous. However, creating a brand is expensive which means that you must have deep pockets before starting. Not only do you need to build your actual facility, but also create advertising to support your sales. So, if you have enough funds, do it. The investment is worth it because your price will be higher because you have a brand.
My third is the experience. If I call a company, it’s because they “know what they do.” This gives me the guarantee that your work and your product is fine. It may not be the fairest, but consumers rely more on companies that have existed longer. Also, if you have more experience, you can probably do your job more efficiently and thus have a reduced cost compared to your competitors.
Many of you who plan to start a business, surely believe that they must have an original product, but it is not necessary. Having an original idea for how to produce or sell something that already exists is also technological innovation and this gives a competitive advantage.