Lecture: 13 Ways to Legally Destroy Your Competition

1. Network Effects

• Types: Customer Base, Product Ecosystem
  • Customer Base: Large user base attracts more people; e.g., Facebook, Verizon/AT&T
  • Product Ecosystem: Closed loop systems; e.g., Apple’s unique plugs/software
• Business Application: Structure to add value as customer base grows; e.g., buyer groups like dentists
• Importance: Tech companies willing to lose billions for networks

2. Exclusive Control Over a Resource or Technology

• Example: Deers Group (diamonds), Google Search
• Means: Control essential resources or proprietary technology
• Competitive Advantage: Hard to replicate, ensures profit

3. Government Regulations and Licensing

• Types: Government grants, Licensing requirements
  • Examples: Amtrak, Con Edison
  • Smaller Scale: Liquor licenses
• Business Insight: Navigating gov't regulations can provide advantage

4. Economies of Scale

• Strategy: Lower cost per unit through large-scale production
• Examples: Airlines, software companies
• Business Scale Insight: Economies of scale improve businesses as they grow

5. Vertical Integration

• Types: Control over Supply, Distribution Networks
  • Examples: Tesla’s entire supply chain, self-publishing books
• Advantages: Quality control, profit margins, decreased risk
• Business Insight: Controlling more of the supply chain and distribution improves competitiveness

6. Strong Brand Identity and Customer Loyalty

• Strategy: Build powerful associations; become synonymous with product
• Examples: Google (search engines), Nike (commoditized products)
• Importance: Higher conversion rates, premium pricing
• Business Insight: Brand loyalty built with skill and time is a significant competitive advantage

7. Strategic Pricing

• Types: Price discrimination, Predatory pricing
  • Examples: Airlines, Microsoft software
• Business Insight: Pricing strategies can outmaneuver competition

8. Exclusive Contracts

• Types: Supply, Customers, Distribution
  • Examples: Hershey's cocoa nibs, government contracts (Lockheed Martin)
  • Distribution: Coca-Cola, Pepsi
• Business Insight: Exclusive contracts can protect and expand market presence

9. Huge Capital Requirements

• Examples: SpaceX, Exxon Mobil
• Business Insight: High entry costs limit competition; easier for businesses with capital

10. Intellectual Property (IP)

• Types: Patents, Trade Secrets
  • Examples: Books, Coca-Cola recipe
• Legal Insight: Protects products, encourages investment in development

11. Acquisitions and Mergers

• Strategy: Market consolidation
  • Examples: Meta (Facebook/Instagram/WhatsApp)
• Business Insight: Consolidation can lead to dominance in market segments

12. Innovative Business Model

• Strategy: Disruptive pricing models; monetize another way
  • Examples: Google Docs (competitors to Microsoft), Spotify (free music with ads)
• Business Insight: Innovative models challenge traditional markets

13. Control Over Distribution Channels

• Examples: Amazon (warehouses and delivery network)
• Business Insight: Owning distribution simplifies market control

Summary

• Achieving a competitive edge involves creating barriers for competitors.
• Monopolies, although frowned upon, often persist.
• Focus on weaving one or more strategies into business DNA for long-term success.