It is understood as a business strength as a key competitive advantage that at a given time, or as a key to its mission, vision or values, which distinguishes a company from its competitors. From Amazon or Tesla to Starbucks or Coinbase, as well as the rest of the largest global companies, they have built and defended their strengths.
What do companies like Amazon, Uber or Starbucks have in common?
Among several common characteristics, these companies thrive on understanding, building and business strengths, the key competitive advantages that set them apart from the rest.
Warren Buffett promoted the popularization of this concept, saying that the strength of a company (or lack thereof) means everything when deciding to invest in it:
"The key...is not to assess how much an industry is going to affect society, or how much it will grow, but rather to determine the competitive advantage of a given company and, above all, the durability of that advantage."
Companies can strengthen their brands, achieving economies of scale or even lobbying for special status from governments. In return, they can be rewarded with increased customer loyalty, pricing power, and legal coverages that make it harder for other companies to compete with them.
In the XNUMXth century, the world's largest companies were built on strengths based on economies of scale (globalization) or government (protection).
Standard Oil, for example, built its monopoly by buying smaller competing refiners and building a global distribution network. Ultimately, the company controlled about 90% of all refineries and pipelines in the United States and could set its own prices.
Today, however, the most consistent and sustainable strengths are being built on different types of advantages, such as network effects, data, and participation within a product ecosystem.
Google, for example, fed his strength on the differential value of having developed a better algorithm to index and search the Internet. Since then, the company has grown stronger by exchanging that advantage in transportation, shopping and, most importantly, advertising.
The following series presents some of these best practices and how they have been applied and taken advantage of by new digital companies and have transformed them into differential strengths in the global market.
- Customer Network Impact
