BUSI 701

Artistic Entrepreneurship
Class 7
Sustainable Competitive Advantage
 Vernon’s Razor
1. Value Proposition
2. Market Potential Defining
Opportunity
3. Return
4. Team Minimizing
5. Competitive Advantage Risk
6. Business Model
7. Customer Pain
Sustainable Competitive Advantage
• #2 way to minimize risk: beat the
competition
• VCs call it “secret sauce”
 Types of Advantages
• Intellectual property
• Barriers to entry
• Expertise, talent, relationships
• Location
• First-mover?
 Intellectual Property (IP)
• Patents: new inventions, designs, systems or
technologies ; generally 20 years
• Copyrights: for compositions (words, music,
video); generally life of author +70 years
• Trade secret: can include a secret recipe,
customer data, suppliers, systems, processes or
anything else that we know about doing business
that others cannot easily figure out
• Trademark: a symbol that only you can use
 IP
• “Strong IP” means protectable competitive
advantage
• Home run example: patented drug =
monopoly until it “goes generic”
• Copyrights for software authors: not a
strong defense
• Trade secret is often best defense
 Barriers to Entry
• Economies of scale
• Strategic alliances
• Brand identity
• Switching costs
• Capital requirements
• Access to distribution / marketing / selling channels
• Government policies / regulations
• Expected retaliation
• Cost advantages
‘Barriers to Entry’ by Vadim Kotelnikor
 Expertise, Talent, Relationships
Beyond the management skills of the TEAM
• Expertise: a skill or trade secret held by an
individual or a firm
• Talent: chef, designer, artist, gifted
programmer
• Relationships: special treatment from
suppliers, customers, providers, etc.
 Location, Location, Location
• #1 issue for retail venture
• Includes “atmosphere” for businesses that
sell experiences (restaurants, theaters, music
venues, etc.)

• E.g., Starbucks growth strategy

 First-Mover vs. Smart Successor
• Early bird or second mouse?
• First mover advantage sometimes called a “myth”
• Real advantage: waiting, watching and executing
• Fast followers or smart successors
– Market has been educated
– Technologies have been tested and may be cheaper
– Time for primary learning is reduced

Accenture article
 First-Mover
Only an advantage if you can create barriers
to entry:
1. Switching costs
• Create a “sticky” product
• Lock in your customers with long-term contracts
2. “Land grab” – get big fast
• Economies of scale with sustainable cost advantage
• Market dominance*
– Very, very hard (and expensive) to attain
– Very, very hard to keep without one of the above
 Switching Costs Examples
• Automobile, house, paper clip
• Accounting software
• TurboTax
• Social networking website
Reticent Industries
• Chat software • Government
• PC vs. MAC • Education
• Military
• A sticky product is • Medical
an advantage
 Sizing up the Competition
Threat of
Industry Analysis: New Entrants
Porter’s Five Forces

Suppliers’ Industry Buyers’

Power Competitiveness Power

Threat of
Substitutes
Sizing up the Competition – Tools
• Competitive landscape chart
• Product attribute chart
• Competitors attribute chart
– Type of companies
– Stage of companies
– Differing strategies
 Competitor Comparison
Price Per 1000
Product Year Started Customer Count Emails Mo. Employees Pricing Model
# Emails

1 Constant Contact 1998 50000 250 Million $6 to $15 110 Subscription

2 Vertical Response 2001 5000 50 Million $7 to $15 21 Per 1000

3 IntelliContact 2003 4500 50 Million $2 to $10 24 Subscription

Base + Per 1000

4 MailerMailer 2001 4000 40 Million $3 to $7 16
Emails

5 Emma 2002 2000 12 Million $5 to $30 14 Subscription

6 CampaignMonitor 2004 2000 8 Million $10 12 Per 1000

 Product Comparison

Class:Drug Target Company Status Indications Controllable

Heparins
UFH Thr/Xa Generic Approved All Yes (protamine)
LMWH Xa/Thr Aventis (Lovenox) Approved VTE, A-DVT, UA/MI No
Direct Thrombin Inhibitors
Angiomax Thr The Medicines Company Approved Emergency PCI, HIT Yes (half-life)
ARC183 Thr Archemix Pre-clinical CABG, PCI Yes (half-life)
Factor Xa Inhibitors
Arixtra Xa (ATIII) Sanofi/Organon Approved VTE No
Factor IXa Inhibitors
Trigen IXa Trigen Pre-clinical unknown No
Product Attributes
 Competition Competitors Business Description
Type
Fair Trade Mercado Global Small nonprofit online Fair Trade retailer and wholesaler
World of Good Medium for profit online Fair Trade retailer and wholesaler. Sells items to Whole
Food outlets on the West Coast.
Global Exchange Medium nonprofit online Fair Trade retailer. Global Exchange also sells its
products in a limited number of stores. Global Exchange’s mission is to
promote social, economic, and environmental justice around the world.
Global Exchange promotes its mission by: selling Fair Trade items, hosting
socially conscious travel tours, and running advocacy campaigns global trade
issues. Global Exchange has partnered with Felicite.com to create a gift
registry on their site.
SERRV, 10,000 Villages Large, Christian-based non-profits. Both organizations sell online, wholesale to
other Fair Trade retailers, and sell in a limited number of stores. Combined,
the two retailers had gross receipts of almost $24 million in 2005. SERRV
and 10,000 Villages source most of their products from church-affiliated
organizations.
Online I Do Foundation The I Do Foundation is a nonprofit that links engaged couples with a host of
Retail/Wedding charitable giving options at their wedding. It is the I Do Foundation’s goal to
Registries serve 200,000 brides a year.
Organic Weddings Organic Weddings is a comprehensive wedding planning resource for couples
striving to live healthy, natural lifestyles with regard for our environment.

Crate & Barrel, Large online and offline retailers of home goods and kitchenware.
Williams-Sonoma
The Knot, Online wedding sites offering wedding advice and gift registries. The Knot’s
WeddingChannel.com registry features its own items and an option to register with Target. The
Wedding Channel allows users to register with several registries including