What are the three types of competitive advantages start-ups can hope to build? How are they related to risk?
Start-ups can hope to build the competitive advantage of having access to the customer by building customer loyalty and trust via reputation (Da Rin and Hellmann, 2017). This involves addressing the customer’s need, getting early access to the market and building a sales strategy to earn the trust and loyalty of their customers. This is important as such capabilities are classed complementary assets where according to Teece (1986), profits accrue to the owners of complementary assets when appropriability regimes are weak. For instance, Zoona Mobile should aim to interact with a wide range of customers offering a high quality service to gain their loyalty and trust.
The competitive advantage of creating entry barriers to overcome competitors, both new and existing can be built by creating a competitive solution which can outcompete competitors either in price or quality. Furthermore, production capabilities can help compete competitors by keeping costs down or by providing imitable quality. Particularly, obtaining proprietary assets in this respect can prevent competitors. This can be obtained by expanding their booths across Zambia with many clients who are well connected to their community making it difficult for other competitors to enter the market and compete.
Specific skills, networks and talents of entrepreneurs can create value, for instance, by increasing sales through networks to leading retailers or talents leading to increased production capacities giving increased revenue. This can be rare if other competitors do not possess it and usually imitable, as these skills and revenues can be hard to imitate from other entrepreneurs. If the entrepreneurs can organise well to take advantage of this it can lead to sustained competitive advantage according to the VRIO framework (Barney, 2019). For instance, Mike Quinn talents as an Oxford MBA graduate to lead Zoona Mobile as CEO with excellent sales skills will be hard for other ventures to replicate. Furthermore, the experience of Brad Magrath in the Zambian Payments association has given him invaluable knowledge of the market.