The risks in property development are:
1. Insufficient own capital to fund the project.
2. Over-leverage and excessive borrowings.
3. Poor sales for various reasons - poor location, industry related reasons.
4. Cyclical downturn.
Many property projects are launched in the cyclical upturn of the industry. Soon many more jumped in the game. When the cyclical downturn comes, the weaker developers suffer.
Monday 27 May 2013
How then do you assess management quality?
Those in management should have integrity, intelligence and also must be hardworking. Most importantly, they should have integrity. Search and look for integrity in the managers; without this, their intelligence and hardworking will work against the interest of the shareholders.
In present day perspective, the shareholders and the management interests are linked or in conflict mainly in two principal areas of:
(1) competence of management and,
(2) policies of management toward stockholders - notably in the matter ofdividends.
What are your views of companies hoarding cash aplenty when perhaps, the better decision is to distribute the cash to the shareholders in dividends or share buy-backs?
In present day perspective, the shareholders and the management interests are linked or in conflict mainly in two principal areas of:
(1) competence of management and,
(2) policies of management toward stockholders - notably in the matter ofdividends.
What are your views of companies hoarding cash aplenty when perhaps, the better decision is to distribute the cash to the shareholders in dividends or share buy-backs?
WHY KEEP CASH?
Different strategies for investing available cash. WHY KEEP CASH?
One significant difference between many investors is evident in the different strategies for investing available cash.
Some investors will typically choose to be fully invested at all times, since cash balances would likely cause them to lag behind a rising market.
Other investors, by contrast, are willing to hold cash reserves (for the short term) when no bargains are available. Among the reasons offered are:
1. Cash is liquid and provides a modest, sometimes attractive nominal return, usually above the rate of inflation.
2. The liquidity of cash affords flexibility, for it can quickly be channeled into other investment outlets with minimal transaction costs.
3. Finally, unlike any other holding, cash does not involve any risk of incurring opportunity cost (losses from the inability to take advantage of future bargains) since it does not drop in value during market declines.
Reminder:
Do not underestimate the power of CASH for the short term.
For the long term, CASH deposits will always lose out to inflation.
One significant difference between many investors is evident in the different strategies for investing available cash.
Some investors will typically choose to be fully invested at all times, since cash balances would likely cause them to lag behind a rising market.
Other investors, by contrast, are willing to hold cash reserves (for the short term) when no bargains are available. Among the reasons offered are:
1. Cash is liquid and provides a modest, sometimes attractive nominal return, usually above the rate of inflation.
2. The liquidity of cash affords flexibility, for it can quickly be channeled into other investment outlets with minimal transaction costs.
3. Finally, unlike any other holding, cash does not involve any risk of incurring opportunity cost (losses from the inability to take advantage of future bargains) since it does not drop in value during market declines.
Reminder:
Do not underestimate the power of CASH for the short term.
For the long term, CASH deposits will always lose out to inflation.
Saturday 25 May 2013
The Intelligent Investor is likely to need considerable willpower to keep from following the crowd - Benjamin Graham
Have the Discipline to Say No
Arming yourself with a sound investment philosophy and search strategy puts you on the path to selecting businesses suitable for investment. Once a business is valued, the most difficult determinants of whether to invest or not come into play.
Unlike valuation, which primarily relies on quantitative measures, investors now must rely on qualitative factors:
These factors are exceedingly important because the probability of suffering investment loss is significantly higher due to the emotional underpinnings of these factors.
Most investors are smart; few, however, are disciplined enough to say no and move on or, more important, be patient. Very few activities in life can be practiced successfully without some degree of discipline. Being disciplined requires you to think independently and ignore crowd psychology. Discipline requires investors to be confident in their research and analysis and be prepared to receive criticism from all angles.
Yet disciplined investors clearly realize that investment success comes from sticking to their methods and not participating in crowd folly.
Arming yourself with a sound investment philosophy and search strategy puts you on the path to selecting businesses suitable for investment. Once a business is valued, the most difficult determinants of whether to invest or not come into play.
Unlike valuation, which primarily relies on quantitative measures, investors now must rely on qualitative factors:
- Having the discipline to say no.
- Being patient.
- Having the courage to make a significant investment at a maximum point of pessimism.
These factors are exceedingly important because the probability of suffering investment loss is significantly higher due to the emotional underpinnings of these factors.
Most investors are smart; few, however, are disciplined enough to say no and move on or, more important, be patient. Very few activities in life can be practiced successfully without some degree of discipline. Being disciplined requires you to think independently and ignore crowd psychology. Discipline requires investors to be confident in their research and analysis and be prepared to receive criticism from all angles.
Yet disciplined investors clearly realize that investment success comes from sticking to their methods and not participating in crowd folly.
Wednesday 22 May 2013
Insiders Selling to lock in their gains during this bull market.
| Date Announced | 22-May-13 | |||
| Changes in Share Holdings | ||||
| Company | Shrs Acquired/ | Director/Substantial Shareholder | Shrs held | |
| (Disposed) | after Changed | |||
| ALLIANCE FINANCIAL GROUP BERHAD | AFG | (909,000) | Employees Provident Fund Board | 190,793,140 |
| 81,000 | ||||
| ALLIANCE FINANCIAL GROUP BERHAD | AFG | (24,400) | Mitsubishi UFJ Financial Group, Inc ("MUFG") | 80,532,807 |
| ALLIANCE FINANCIAL GROUP BERHAD | AFG | (3,400) | Mitsubishi UFJ Financial Group, Inc ("MUFG") | 80,529,407 |
| ALLIANCE FINANCIAL GROUP BERHAD | AFG | (300,000) | Employees Provident Fund Board | 191,111,240 |
| 618,100 | ||||
| ALLIANCE FINANCIAL GROUP BERHAD | AFG | 2,900 | Mitsubishi UFJ Financial Group, Inc ("MUFG") | 80,532,307 |
| AIRASIA BERHAD | AIRASIA | 4,000,000 | Employees Provident Fund Board | 231,549,000 |
| MALAYSIA AIRPORTS HOLDINGS BERHAD | AIRPORT | (7,700) | Employees Provident Fund Board | 135,171,520 |
| AL-`AQAR HEALTHCARE REIT | ALAQAR | 1,311,400 | Lembaga Tabung Haji | 57,761,356 |
| AMMB HOLDINGS BERHAD | AMBANK | (81,100) | Employees Provident Fund Board | 331,972,457 |
| 2,928,900 | ||||
| BENALEC HOLDINGS BERHAD | BENALEC | (2,782,000) | Kumpulan Wang Persaraan (Diperbadankan) | 53,064,600 |
| BIMB HOLDINGS BERHAD | BIMB | 659,000 | Employees Provident Fund Board | 97,370,700 |
| BINTULU PORT HOLDINGS BERHAD | BIPORT | (293,900) | KUMPULAN WANG PERSARAAN (DIPERBADANKAN) | 38,792,300 |
| BOILERMECH HOLDINGS BERHAD (ACE Market) | BOILERM | (668,800) | Leong Yew Cheong | 38,877,412 |
| BURSA MALAYSIA BERHAD | BURSA | (5,800) | Mitsubishi UFJ Financial Group, Inc. ("MUFG") | 27,869,258 |
| 42,400 | ||||
| CIMB GROUP HOLDINGS BERHAD | CIMB | (1,354,400) | Employees Provident Fund Board | 877,827,032 |
| 1,186,000 | ||||
| CIMB GROUP HOLDINGS BERHAD | CIMB | (433,900) | Mitsubishi UFJ Financial Group Inc (MUFG) | 794,785,177 |
| CAPITAMALLS MALAYSIA TRUST | CMMT | (750,000) | Employees Provident Fund Board | 165,943,600 |
| DIALOG GROUP BERHAD | DIALOG | 2,500,000 | Employees Provident Fund Board | 372,190,035 |
| DIGI.COM BERHAD | DIGI | (1,014,600) | Employees Provident Fund Board | 1,201,738,740 |
| DOLOMITE CORPORATION BERHAD | DOLMITE | 278,970 | HUANG JEN SOONG | 9,074,073 |
| DRB-HICOM BERHAD | DRBHCOM | 500,000 | EMPLOYEES PROVIDENT FUND BOARD | 146,287,600 |
| EASTERN & ORIENTAL BERHAD | E&O | 311,600 | CIMB COMMERCE TRUSTEE BERHAD | 59,504,000 |
| EASTERN & ORIENTAL BERHAD | E&O | 8,351,900 | CIMB COMMERCE TRUSTEE BERHAD | 67,855,900 |
| FELDA GLOBAL VENTURES HOLDINGS BERHAD | FGV | 342,000 | EMPLOYEES PROVIDENT FUND BOARD | 299,986,370 |
| FELDA GLOBAL VENTURES HOLDINGS BERHAD | FGV | (105,000) | KUMPULAN WANG PERSARAAN (DIPERBADANKAN) | 253,079,800 |
| GENTING PLANTATIONS BERHAD | GENP | (5,000) | KUMPULAN WANG PERSARAAN (DIPERBADANKAN) | 46,545,700 |
| GENTING PLANTATIONS BERHAD | GENP | (200,000) | EMPLOYEES PROVIDENT FUND BOARD | 116,458,200 |
| HAP SENG CONSOLIDATED BERHAD | HAPSENG | (8,935,100) | Gek Poh (Holdings) Sdn Bhd | 1,272,992,880 |
| HAP SENG CONSOLIDATED BERHAD | HAPSENG | (8,935,100) | Hap Seng Insurance Services Sdn Bhd ["HSIS"] | 108,481,780 |
| HONG LEONG BANK BERHAD | HLBANK | 80,000 | Employees Provident Fund Board | 260,375,772 |
| HOCK SENG LEE BERHAD | HSL | 263,400 | Employees Provident Fund Board | 56,128,560 |
| HAP SENG PLANTATIONS HOLDINGS BERHAD | HSPLANT | (2,916,000) | Gek Poh (Holdings) Sdn Bhd | 424,240,000 |
| HAP SENG PLANTATIONS HOLDINGS BERHAD | HSPLANT | (2,916,000) | Hap Seng Consolidated Berhad | 424,240,000 |
| ICAPITAL.BIZ BERHAD | ICAP | 129,200 | City of London Investment Management Company Ltd | 12,781,900 |
| IGB CORPORATION BERHAD | IGB | (175,100) | Employees Provident Fund Board (EPF) | 92,544,122 |
| 193,400 | ||||
| IHH HEALTHCARE BERHAD | IHH | 1,043,900 | Employees Provident Fund Board | 530,355,000 |
| IJM CORPORATION BERHAD | IJM | (123,300) | Kumpulan Wang Persaraan (Diperbadankan) | 102,766,280 |
| 200,000 | ||||
| IJM CORPORATION BERHAD | IJM | (500,000) | Employees Provident Fund Board | 154,793,489 |
| 100,000 | ||||
| IJM LAND BERHAD | IJMLAND | (174,200) | Employees Provident Fund Board | 75,870,300 |
| KUALA LUMPUR KEPONG BERHAD | KLK | 31,500 | Employees Provident Fund Board | 162,743,138 |
| MAH SING GROUP BERHAD | MAHSING | 175,000 | Employees Provident Fund Board ("EPF") | 103,001,960 |
| MAH SING GROUP BERHAD | MAHSING | (3,000,000) | Kumpulan Wang Persaraan (Diperbadankan) | 57,173,866 |
| MAH SING GROUP BERHAD | MAHSING | (3,100,000) | Kumpulan Wang Persaraan (Diperbadankan) | - |
| MAXIS BERHAD | MAXIS | 2,019,000 | Employees Provident Fund Board ("EPF Board") | 478,710,400 |
| MALAYAN BANKING BERHAD | MAYBANK | (5,698,000) | EMPLOYEES PROVIDENT FUND BOARD | 874,025,124 |
| MBM RESOURCES BHD | MBMR | (500,000) | EMPLOYEES PROVIDENT FUND BOARD | 58,401,891 |
| 170,000 | ||||
| MICROLINK SOLUTIONS BERHAD (ACE Market) | MICROLN | 3,000 | Insas Berhad | 7,852,400 |
| MICROLINK SOLUTIONS BERHAD (ACE Market) | MICROLN | 3,000 | Insas Plaza Sdn Bhd | 7,852,400 |
| MISC BERHAD | MISC | (34,300) | Employees Provident Fund Board | 426,309,958 |
| MISC BERHAD | MISC | (811,700) | Employees Provident Fund Board | 426,442,158 |
| MISC BERHAD | MISC | (97,900) | Employees Provident Fund Board | 426,344,258 |
| MK LAND HOLDINGS BERHAD | MKLAND | (8,700,000) | KASI A/L K L PALANIAPPAN | 268,134,415 |
| MNRB HOLDINGS BERHAD | MNRB | (255,200) | AMANAHRAYA TRUSTEES BERHAD - SKIM AMANAH SAHAM BUMIPUTERA | 101,423,000 |
| METRONIC GLOBAL BERHAD | MTRONIC | (8,000,000) | Ling Yew Kong | 37,355,000 |
| NESTLE (MALAYSIA) BERHAD | NESTLE | (32,200) | Employees Provident Fund Board | 23,404,200 |
| NESTLE (MALAYSIA) BERHAD | NESTLE | (1,200) | Employees Provident Fund Board | 23,403,000 |
| NESTLE (MALAYSIA) BERHAD | NESTLE | (5,000) | Employees Provident Fund Board | 23,398,000 |
| NYLEX (MALAYSIA) BERHAD | NYLEX | 227,800 | Pacific & Orient Berhad | 85,356,388 |
| NYLEX (MALAYSIA) BERHAD | NYLEX | 227,800 | Chan Thye Seng | 85,356,388 |
| NYLEX (MALAYSIA) BERHAD | NYLEX | 227,800 | Mah Wing Holdings Sdn Bhd | 85,356,388 |
| NYLEX (MALAYSIA) BERHAD | NYLEX | 227,800 | Mah Wing Investments Limited | 85,356,388 |
| ORIENTAL HOLDINGS BERHAD | ORIENT | 2,100 | Aberdeen International Fund Managers Limited | 46,725,100 |
| ORIENTAL HOLDINGS BERHAD | ORIENT | 36,100 | Aberdeen International Fund Managers Limited | 46,761,200 |
| ORIENTAL HOLDINGS BERHAD | ORIENT | 2,100 | Aberdeen Asset Management Asia Limited | 54,222,700 |
| ORIENTAL HOLDINGS BERHAD | ORIENT | 36,100 | Aberdeen Asset Management Asia Limited | 54,258,800 |
| ORIENTAL HOLDINGS BERHAD | ORIENT | 2,100 | Aberdeen Asset Management PLC and its subsidiaries | 66,145,200 |
| ORIENTAL HOLDINGS BERHAD | ORIENT | 36,100 | Aberdeen Asset Management PLC and its subsidiaries | 66,181,300 |
| PANASONIC MANUFACTURING MALAYSIA BERHAD | PANAMY | 2,000 | Mitsubishi UFJ Financial Group,Inc ("MUFG") | 6,073,000 |
| PANASONIC MANUFACTURING MALAYSIA BERHAD | PANAMY | 700 | Aberdeen Asset Management PLC and its subsidiaries | 8,731,800 |
| PANASONIC MANUFACTURING MALAYSIA BERHAD | PANAMY | 2,000 | Aberdeen Asset Management PLC and its subsidiaries | 8,733,800 |
| PANTECH GROUP HOLDINGS BERHAD | PANTECH | (1,200,000) | GL MANAGEMENT AGENCY SDN BHD | 79,895,960 |
| PANTECH GROUP HOLDINGS BERHAD | PANTECH | (1,200,000) | DATO’’ GOH TEOH KEAN | 79,895,960 |
| PANTECH GROUP HOLDINGS BERHAD | PANTECH | (1,200,000) | DATIN LEE SOCK KEE | 79,895,960 |
| PARKSON HOLDINGS BERHAD | PARKSON | (559,300) | Kumpulan Wang Persaraan (Diperbadankan) ("KWAP") | 55,968,954 |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Guoco Group Limited | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | GuoLine Overseas Limited | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | GuoLine Capital Assets Limited | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Hong Leong Company (Malaysia) Berhad | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | HL Holdings Sdn. Bhd. | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Tan Sri Quek Leng Chan | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | GLL (Malaysia) Pte. Ltd. | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Pembinaan Sri Jati Sdn. Berhad | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Bedford Development Sdn. Bhd. | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | GuocoLand Limited | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | GuocoLand Assets Pte. Ltd. | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Hong Realty (Private) Limited | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Hong Leong Investment Holdings Pte. Ltd. | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Kwek Holdings Pte. Ltd. | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Kwek Leng Beng | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Davos Investment Holdings Private Limited | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Kwek Leng Kee | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | Quek Leng Chye | - |
| PASDEC HOLDINGS BERHAD | PASDEC | (1,750,200) | GuocoLand (Malaysia) Berhad | - |
| PUBLIC BANK BERHAD | PBBANK | (1,925,900) | Employees Provident Fund Board | 461,040,381 |
| 130,000 | ||||
| PETRONAS CHEMICALS GROUP BERHAD | PCHEM | 950,000 | Employees Provident Fund Board | 1,012,690,800 |
| PETRA ENERGY BERHAD | PENERGY | (1,241,000) | Lembaga Tabung Haji | 22,299,412 |
| PERISAI PETROLEUM TEKNOLOGI BHD | PERISAI | (2,005,200) | EMPLOYEES PROVIDENT FUND BOARD | 61,793,000 |
| PERISAI PETROLEUM TEKNOLOGI BHD | PERISAI | 1,600,000 | EMPLOYEES PROVIDENT FUND BOARD | 63,393,000 |
| PETRONAS DAGANGAN BHD | PETDAG | (80,000) | Employees Provident Fund Board | 73,440,900 |
| PETRONAS DAGANGAN BHD | PETDAG | 41,900 | Employees Provident Fund Board | 73,482,800 |
| PETRONAS GAS BERHAD | PETGAS | (44,000) | EMPLOYEES PROVIDENT FUND BOARD | 266,966,400 |
| 222,000 | ||||
| PETRONAS GAS BERHAD | PETGAS | (150,900) | KUMPULAN WANG PERSARAAN (DIPERBADANKAN) | 104,779,600 |
| 36,900 | ||||
| POS MALAYSIA BERHAD | POS | (300,000) | Employees Provident Fund Board | 41,467,800 |
| PRICEWORTH INTERNATIONAL BERHAD | PWORTH | (4,500,000) | Lee Kian Vui | 9,648,150 |
| SIME DARBY BERHAD | SIME | (454,400) | Employees Provident Fund Board | 809,389,455 |
| 1,249,800 | ||||
| SAPURAKENCANA PETROLEUM BERHAD | SKPETRO | (816,400) | Employees Provident Fund Board | 679,584,689 |
| 1,150,000 | ||||
| SKP RESOURCES BHD | SKPRES | (9,000,000) | DATO’’ GAN KIM HUAT | 525,424,291 |
| SKP RESOURCES BHD | SKPRES | (9,000,000) | RENOWN MILLION SDN BHD | 175,246,075 |
| S P SETIA BERHAD | SPSETIA | 200,000 | KUMPULAN WANG PERSARAAN (DIPERBADANKAN) | 129,158,850 |
| S P SETIA BERHAD | SPSETIA | 1,850,000 | Employees Provident Fund Board | 128,666,230 |
| S P SETIA BERHAD | SPSETIA | (671,200) | Mitsubishi UFJ Financial Group, Inc ("MUFG") | 133,161,400 |
| SUNWAY REAL ESTATE INVESTMENT TRUST | SUNREIT | (845,000) | Employees Provident Fund Board | 318,304,300 |
| 250,000 | ||||
| TASEK CORPORATION BERHAD | TASEK | 5,000 | Mitsubishi UFJ Financial Group, Inc ("MUFG") | 14,851,759 |
| TH PLANTATIONS BERHAD | THPLANT | 1,480,200 | Employees Provident Fund Board | 47,855,400 |
| TELEKOM MALAYSIA BERHAD | TM | 249,900 | Employees Provident Fund Board | 480,700,300 |
| TOP GLOVE CORPORATION BHD | TOPGLOV | (809,200) | Kumpulan Wang Persaraan (Diperbadankan) | - |
| TRIPLC BERHAD | TRIPLC | (6,488,295) | Gempur Likas Sdn Bhd | - |
| TRIPLC BERHAD | TRIPLC | (6,488,295) | Ho Kim Shing | - |
| TRIPLC BERHAD | TRIPLC | (6,488,295) | Md Zahary Bin Malek | - |
| TRIPLC BERHAD | TRIPLC | 4,000,000 | Minat Bakti Sdn Bhd | 4,000,000 |
| TRIPLC BERHAD | TRIPLC | 4,000,000 | Aidil Bin Abdul Aziz | 4,000,000 |
| TRIPLC BERHAD | TRIPLC | 4,000,000 | Ruzlan Bin Rahmat | 4,000,000 |
| UNITED MALACCA BERHAD | UMCCA | 12,800 | Aberdeen Asset Management PLC and its subsidiaries ("The Group&qu | 29,152,050 |
| UNITED MALACCA BERHAD | UMCCA | 7,300 | Aberdeen Asset Management Asia Limited | 16,112,350 |
| UNITED MALACCA BERHAD | UMCCA | 7,300 | Aberdeen International Fund Managers Limited | 10,912,650 |
| UNITED MALACCA BERHAD | UMCCA | 5,500 | Aberdeen Asset Management Sdn Bhd | 12,989,700 |
| UNITED MALACCA BERHAD | UMCCA | 20,600 | Mitsubishi UFJ Financial Group, Inc("MUFG") | 29,139,250 |
| UMS-NEIKEN GROUP BERHAD | UMSNGB | 150,000 | Yeo Guik Hiang | 4,012,400 |
| UOA DEVELOPMENT BHD | UOADEV | 600,000 | EMPLOYEES PROVIDENT FUND BOARD ("EPF BOARD") | 79,828,200 |
| UNITED PLANTATIONS BERHAD | UTDPLT | 7,600 | MITSUBISHI UFJ FINANCIAL GROUP. INC (MUFG) | 24,148,000 |
| UNITED PLANTATIONS BERHAD | UTDPLT | 19,800 | Aberdeen Asset Management PLC and its Subsidiaries | 24,167,800 |
| WAH SEONG CORPORATION BERHAD | WASEONG | 83,200 | Employees Provident Fund Board | 45,142,433 |
| WCT BERHAD | WCT | (2,500,000) | Kumpulan Wang Persaraan (DiPerbadankan) | 64,933,210 |
| WCT BERHAD | WCT | (300,000) | Employees Provident Fund Board | 123,708,430 |
| WHITE HORSE BERHAD | WTHORSE | Teo Kim Tay | 12,559,015 | |
| WHITE HORSE BERHAD | WTHORSE | Teo Kim Lap | 12,533,027 | |
| WHITE HORSE BERHAD | WTHORSE | Teo Swee Teng | 13,498,593 | |
| YTL CORPORATION BERHAD | YTL | (3,312,300) | EMPLOYEES PROVIDENT FUND BOARD | 789,297,047 |
| YTL POWER INTERNATIONAL BHD | YTLPOWR | (3,000,000) | EMPLOYEES PROVIDENT FUND BOARD | 586,482,916 |
Tuesday 14 May 2013
5 Steps to Creating a Sustainable Competitive Advantage
Whether you’re pitching investors or launching a new product, success is more likely if you can create and communicate a sustainable competitive advantage.
Being first to market isn’t enough, as someone bigger with something better will come along and leave you in the dust. And it doesn’t matter if there isn’t a product in the market that’s exactly the same as yours. If another company is solving the same pain you’re addressing, for the same customers – they are competition.
While creating a sustainable competitive advantage is not easy, the following will help ensure you get and remain ahead of the field.
1. Establish Brand Loyalty. Customers will often remain with a brand they have loyalty towards, even though the company does not offer the cheapest or most effective product. Focus on building strong relationships with your customers and delivering a great customer experience and service.
2. Patent Your Product. There has been a lot of debate recently about the true value of a patent. While patents are not a ‘cure all’, they are an important weapon in an entrepreneur’s competitive advantage arsenal.
3. Continually Innovate. Customers like updates and upgrades. Keeping your product fresh and compatible with the market place (particularly if software), is essential.
4. Hire ‘Connected’ Team Members. If your market includes large companies and government departments, connections to key individuals within these organizations can dramatically accelerate your ability to meet and secure contracts. Try to have at least one member on your team who is ‘connected’.
5. Use Long Term Contracts and Incentives. This step has to be executed carefully, as it can backfire. If you can establish a long term contract with your customer, then clearly they are less likely to switch to a competitor. If you only offer long terms contracts, however, and your competitors are offering short terms contracts, then you are likely to lose business.
Ideally you want to incentivize your customers to enter into a long term contract with you, possibly by providing a slight reduction in cost or a bonus. Equally, customers are more likely to be willing to enter into a long terms contract if they have just completed a successful short term contract with you.
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