Nature of Competition
This podcast is part one of a three part series on spotting a great business. The entire episode is devoted to one long rant on the nature of competition in various industries, and how such competition should shape your search for a great business. Simply put, this show is about finding the right industries to begin your search for a great business.
Listen to the Gannon On Investing Podcast: “Nature of Competition”
Comments
You mention how competitors interact with one another which is a good point. If competitors fight each other based on price competition, usually economic profit withers.
I would have stressed asking one key question: What are the barriers to entry for this industry? Why does Boeing, Moody's or a one newspaper city (20 years ago) have such profitability? What prevents entry? Then the next question would be what is the SOURCE of that competitive advantage--unique knowledge or technical process, regional economies of scale, customer captivity or some combination or the above?
Stability of firms and their profitability is a good sign that the industry structure is conducive to profitability.
Good luck on your future podcasts,
John Chew
Posted by: John Chew | January 29, 2006 09:38 AM