This week’s podcast is about scale advantages. Which are different than economies of scale.You can listen to this podcast <a href='https://jefftowson.com/2025/06/5-things-people-get-wrong-about-scale-advantages-economies-of-scale-and-moats-tech-strategy-podcast-251/'>here</a>, which has the slides and graphics mentioned. Also available at <a href='https://podcasts.apple.com/us/podcast/jeffs-asia-tech-class/id1482008042'>iTunes </a>and <a href='https://podcasts.google.com/?feed=aHR0cHM6Ly9mZWVkcy5idXp6c3Byb3V0LmNvbS81OTMwODYucnNz'>Google Podcasts</a>.Here is the link to the <a href='https://www.towsongroup.com/'>TechMoat Consulting</a>.Here is the link to our <a href='https://www.towsongroup.com/asia-tech-tour/'>Tech Tours</a>.5 Things People Get Wrong about Scale Advantages, Economies of Scale and Moats<ol><li>There are lots of absolute (not relative) scale advantage. Growth is the default business strategy.</li><li>Scale advantages are bigger (and more vague) than economies of scale</li><li>Scale advantages can cascade</li><li>Scale disadvantages (diseconomies of scale, big company disease) are under-rated and under-measured</li><li>You need to separate barriers from competitive advantages. And measure each specifically.</li></ol>I want to know 3 things:<ol><li>Barriers to entry against new entrants.<ol><li>What specific CRAS to reproduce?</li><li>What is the cost, difficulty and timing to enter?</li></ol></li><li>Competitive advantage against rivals<ol><li>Which CAs specifically? With measurements.</li></ol></li><li>The incumbent or rival response</li></ol>Barriers List from Michael Porter (my interpretation, not exhaustive).<ol><li>Economies of scale. Need to get big to enter. Indivisibility of production capacity and purchasing power matters. Being a multi-business can help incumbent and entrant. Both can share the costs. Both can share the brand. Both can be vertically integrated.</li><li>Brand loyalty. Must spend to overcome loyalty and habit. Also must overcome trust question.</li><li>Capital requirements. Especially if the move is risky and costs are not recoverable (marketing and R&D spent is gone).</li><li>Switching costs.</li><li>Access to distribution channels. You need to convince retailers. This is not on my list.</li><li>Cost advantages not related to scale. Similar to my CA list.</li><li>Proprietary product technology / know how / patents / secrecy are hard to replicate.</li><li>Favorable access to raw materials.</li><li>Favorable locations (at low cost)</li><li>Government subsidies</li><li>Learning or experience curves</li><li>Government policy. Licenses. Compliance costs.</li></ol>My interpretation of Michael Mauboussin's list Competitive Advantages (not exhaustive):<ol><li>Customer Switching Costs: When customers face significant costs (financial, time, or effort) to switch to a competitor, companies can retain market share and maintain pricing power. Examples include software platforms with entrenched user data or services requiring retraining.</li><li>Network Effects: A product or service becomes more valuable as more people use it, creating a self-reinforcing cycle that deters competitors. Social media platforms or payment networks like Visa are classic examples.</li><li>Economies of Scale: Companies with large-scale operations can spread fixed costs over greater output, reducing per-unit costs and enabling lower prices or higher margins. This is common in industries like manufacturing or retail (e.g., Walmart).</li><li>Intangible Assets: These include patents, trademarks, brand reputation, or proprietary technology that competitors cannot easily replicate. Strong brands like Coca-Cola or patented drugs in pharmaceuticals illustrate this advantage.</li><li></li></ol><a rel="payment" href="https://jefftowson.com">Support the show</a>

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