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Andrew Penny, March 23 2021

Asset Baggage

When you go to a new market, you consider both your best opportunities to obtain new clients and protect yourself from the competition. If you can identify your competition's asset baggage, you can rest assured you will find your sweet spot.

Asset baggage includes a company's brand, staff, IT systems, distribution network, marketing collateral, inventory, and so on. That asset baggage keeps business on a steady course. Typically, it is challenging for an established company to move away from its brand, IT systems or trash its inventory. So by looking at the asset baggage of your competition, you can see where you're going to be reasonably well protected for a while as you go into that market.

Tesla reinvented the approach to car assembly. As opposed to GM or Toyota with massive suppliers' networks, Tesla doesn't have any of that. GM, Ford, and Toyota have networks of dealers all over the world. These dealers are inextricably tied into their business. They're bound financially, legally, from a brand point of view, and customer service-wise. If you wanted to buy a car in the not too distant past, you could read about it somewhere. You might even be able to read about it online, but if you wanted accurate information, you had to go to the dealer. Dealers did the sales service and localization of the product.

Tesla, on the other hand, has an entirely centralized system. You can learn about your Tesla online, check pricing, and place an actual order. Once purchased, you get your vehicle delivered to your door, and when repair work is needed, Tesla will pick it up and take care of it. Tesla does not use an extensive network of dealers. GM or Toyota can't follow because of their asset baggage. They are stuck with their distribution networks, their massive assembly and manufacturing systems, and they're not going to be able to move into the space that Tesla has opened up.

So if you're going into any new market, think like Tesla. Think about where you're best suited to play, but also look at your competition and see what asset baggage they have that will make it very difficult for them to play the new game you're introducing. 

Written by

Andrew Penny

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