Competitive edge, also known as competitive advantage, is whatever you have that others can only wish for.
Last week I found out that Dangote Cement grew both revenue and profit last year. It was almost unbelievable. Its biggest competitor took a terrible beating last year. Most of the manufacturing companies had a very tough year 2016. And Dangote Cement was constantly in the news about its troubles in the other African countries it is expanding to. I was expecting to see an annual report that reflected those difficulties. On the contrary, I saw an annual report that was just short of pure magic.
How could a company as big as Dangote Cement rise so fast and seem to just be starting?
Today, on my way to teaching a Power BI class for Promasidor Group, I read through the 232 page Dangote Cement 2016 Annual Report. I came off with one conviction -- I have to invest in Dangote Cement. It is everything Warren Buffett describes as a perfect company: shark-infested moat (his slang for superior competitive advantage), excellent management team (as an aside, the Group CEO earns N260 million/year as basic salary) and it's in a growing market.
At the current price it is trading at, it is huge value for money. As soon as I am done with sorting out the company income tax and FRC registration (which is taking a sad turn as all the authorized corporate membership bodies I reached are asking for over N400,000 in registration, exams and induction fees + wiping out weeks of my precious time to take meaningless classes and exams), I will put in as much as I can in Dangote Cement shares.
Know the most interesting bit in the 2016 annual report? It is the clear detailing of their competitive edge, not just in the Nigerian market but across the African market. In fact, I'll post it below:
"The Company that became Dangote Cement was founded at a time when Nigeria was almost entirely dependent on imports. Indeed, importation of cement was our main business for many years until the Federal Government launched its industrial policy of Backward Integration in 2002.
We began 2016 with approximately 44Mta of production and import capacity across Africa. Our 3.0Mta plant in Tanzania made its maiden contribution to Group sales in the first quarter of the year and very quickly established itself as a leading supplier, achieving a 23% market share by June 2016.
Our operational advantage in Sub-Saharan Africa is our ability to enter new markets and build modern, energy efficient factories that will provide strong competition for many of the ageing cement plants that serve the region at present. We will take high-quality limestone from newly mined quarries and produce higher-quality, stronger and quicker-setting cement at lower cost than many other producers can achieve in these markets. We will support these facilities with strong logistics and the ability to buy resources in bulk across the Group, thereby reducing costs.
These strategic and operational advantages will fortify our position as the leading provider of cement in a rapidly growing continent that is embarking on a huge build-out of its infrastructure, housing and commercial space. The experience of other emerging markets shows that this will take more than one generation of Africans to complete, but we believe it is a great opportunity for us to become a global force in cement production.
We are confident that the strategy we are pursuing will ensure that Dangote Cement becomes and remains the partner of choice for those who are building a new African continent."
It got me seriously thinking about what my own (and business') competitive advantage is? And I also felt very ashamed that a very large company like Dangote Cement is able to adjust better to its business world than a small one like mine.
Being a generous person, I don't want to be the only one feeling guilty about not identifying or maximizing my competitive advantage so I am going to ask you, "What is your competitive advantage?"