EC Why Unique Assets Are A Great Competitive Advantage

Over the past many weeks, we've gone in depth with each of the ways a company can secure durable advantages against their competitors, also known as economic moats. Those ways are:

  • Brand building that allows higher pricing or creates "automatic purchases".
  • Network economics that attract buyers and sellers at the expense of competing networks.
  • Government-imposed regulatory barriers like patents, approvals, or restrictions that legally prevent other companies from competing.
  • Economies of scale that allow a company to sustainably produce products at lower prices and/or out-invest competitors in marketing and R&D.
  • Switching costs where a valuable service is difficult, expensive, and time-consuming for a client to switch away from without disrupting business.

To these we will add the last moat source today: Unique Assets. Let's take a look.

What Is The Unique Assets Moat?

The term "unique assets" is rather vague. In fact, it could really be applied to most of the other moat factors. A strong brand is a unique asset. So is a massive, globe-spanning payment network. So is a key patent for a billion dollar drug.

Those are not what we mean here.

The unique assets moat refers to ownership of a limited, economically valuable resource. Frequently these are natural resources, but can also be an artificial asset that a company has produced that is highly unlikely to be duplicated. The key point is that any competitor cannot just get a loan and gain access to these assets - they are either naturally limited, or extremely time consuming to acquire.

Through ownership of these unique assets, a company has the ability to generate revenues and profits that competitors simply cannot. Although there may be competition that wants to compete in the space, the difficulty in securing the assets needed to do so keeps them out of the industry, protecting incumbents.

That's the high level explanation. Now, let's look at a few real world examples.

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Disclaimer: The content is provided by Alexander Online Properties LLC (AOP LLC) for informational purposes only. The material should not be considered as investment advice or used as the basis ...

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Gil Richards 6 months ago Member's comment

Great read, highly recommended.