Competitive Advantage

The lead-off article in our 2017 Winter Newsletter was entitled “Do You Have a Competitive Advantage.”   I bring this up simply as a reminder.   We firmly believe having a competitive advantage will be the difference between mere survival and true success in the future.   There is no reason that you cannot have a competitive advantage – if you want one.   It is up to you!   There are two primary types of competitive advantages – a cost advantage and a differential advantage.

A cost advantage exists when a business is able to deliver the same product as competitors but at a much lower cost.   This requires a lower cost of production.   Low-input cow-calf producers, for example, have a big competitive advantage over status quo producers.   Many (perhaps most) PCC customers have  a cost of production that is less than half what the national average is.

A differential advantage is created when a product differs from competing products and is perceived to be superior to competing  products.   Many PCC customers, for example, produce and market grass-finished beef.   While the demand for conventional beef has been struggling, the demand for grass-finished beef has been increasing by leaps and bounds.   While the price of grain-fed animals is about half what it was just over two years ago, the price of grass-finished animals has increased during the same time period.

Several PCC customers have both a cost advantage and a differential advantage.   They produce beef for less than everyone else and they sell it for more than everyone else.   These producers are my heroes!   They are doing what all of their neighbors say is impossible to do.

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