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BLUESTAR Around 92 per cent of the companys revenues comes from ACs and commercial refrigeration equipment business.

Of this, almost 85 per cent of the revenue is contributed by the central and ducted AC systems. Of the remaining, 10 per cent comes from window ACs and the rest from mini split ACs. While there is intense competition in the window and split ACs, Blue Star enjoys a competitive advantage of having over 70 per cent of corporate and commercial customers. Blue star has laumched new turbo rotary remote acs and hi-wall split acs . Competitive advantage is that part of investments where you dont require calculators, spreadsheets and equations. You just need to sit back and think: why is this companys business so good?

Sources of Competitive advantage

There are many sources of competitive advantage and they are as follows: Reputation The very first source is the reputation for quality or desirability that encourages people to pay more. The best example in this category I can think about is of the Apple products. Why people are willing to pay more for iPod and iPhone than any other cheap MP3 players and mobile phones available in market. Regulation or government policy Another source of competitive advantage is government policies and regulations. The examples I can think about is about oil drilling licenses etc. it is very hard or almost next to impossible for any new entrant to get those licenses which Reliance Industries and ONGC enjoy. We can also add those government contracts which IGL owns for supplying gas in metro Delhi and its buses as example. There are two separate opinions in the parliament house and also within the country in regards to FDI policy in retail sector. Small business owners are getting agitated and they are talking about loosing their competitive advantage if these big boys enter into retail market. My personal opinion as a business analyst is that if these big boys enter into the retail sector then the small businesses that do not have competitive advantage will have to work creatively to build that to sustain their businesses. Exclusively access to intellectual property The companies which have exclusive ownership of intellectual property like many pharmaceutical companies like Divis Lab, Glaxosmithkline that manufacture their products using that intellectual property.

We can also add extension to this competitive advantage source the companies which has exclusive rights to access natural resources like companies in mining and minerals sector etc. Brands Even brands are citied to the source of competitive advantage and are most valuable to generate business. We have forgotten word photo copy instead we say Xerox this. If you want paracetamol we ask for Crocin. The owners of these brands have that competitive advantage on their rivals. Vast fortunes are invested in building these brands, but generally accountants cant value them as they are not found in the Balance Sheet. I can list down hundreds of such examples with their competitive advantage but all those companies, however, also run the risk of changes to the width and depth of their competitive advantage. Each source of competitive advantage has its risks. People could simply switch their allegiance. For example recently Zandoo Balm has taken over MOOVE or when Coca-Cola was relaunched in India took over Thumps up. The rules and regulation can wipe out the whole competitive advantage of any company, like Ester Industries. The reform in Gutka packaging made Easter Industries loose its competitive advantage. Good management is also one of the sources of competitive advantage. It is very important that management treat its shareholders as the owner of the company. They should also take sound decisions about allocating capital paying dividends or keeping the money to expand much as they would if they were 100 per cent owner of the business themselves. Most of the investors are consumers and they really understand what derives consumer behaviour. You could tell in an instant that Airtel is better than MTNL or Reliance mobile service is better or these days people are talking about IDEA. But there is another reality that you will make some mistakes everyone does but if you stick to businesses with high rate of returns on equity, little or no debt and you can identify its competitive advantage then you will minimise, to a great extent, the most important risk that of permanent loss of capital.