Can Pepper Jack Cheese Give You a Competitive Advantage?
USA Today reported yesterday that “Pepper Jack as a menu offering on fast-food sandwiches has jumped more than 37% over the past four years”, as consumer tastes continue to shift towards spicy items.
They go on further to report “Marketing gurus say that simply offering the cheese on restaurant menus can give a chain a competitive edge”.
A competitive edge?
The pursuit of competitive advantage in all business endeavors is one of those “holy grail” types of activities. Everyone tries for it, few succeed.
Economic theory tells us that market forces drive prices down to marginal cost, which means firms participating in those markets will not be able to earn premiums over their peers. Invest in a business where investors expect a 10% return, you will make around 10% on your investment, not 15%, or 20%...unless you have a competitive advantage.
The Resource Based View of strategy identifies 4 principle sources of competitive advantage: 1) Heterogeneous Resources, 2) Imperfect Resource Mobility, 3) Ex-Post Limits to Competition, and 4) Ex-Ante Limits to Competition. Let’s look at these one by one.
Is Pepper Jack cheese heterogeneous? While everyone might have their preference for one brand of cheese over another, the distinctive taste of pepper jack cheese is pretty much the same no matter whose cheese you pick, in other words it is much more of a homogeneous product than a heterogeneous one.
Are there limits to the mobility of Pepper Jack cheese? If it is made in Arizona are there factors which make it unable to go to New Mexico, or Colorado, or New York? While there might be some transportation constraints with respect to cheese from any given plant, due to cost of transportation and refrigeration, are there factors which prevent a plant being built somewhere in New York like that in Arizona? No.Continued on the next page