In this piece, I explain how the makers of Indomie noodles used the same strategy Dangote Group had deployed across industrial sectors to defeat Dangote Noodles. The accumulation of capability which Dangote Group uses to crush competitors did not work because Dufil Prima Foods (makers of Indomie) did the same thing from electricity generation to production, for its noodles business. With their vertically integrated business, there was no left inefficiency which Dangote could exploit to improve quality and reduce price.
In the end, an established brand won and Dangote Noodles could not dislodge them. Dangote Group later sold its noodle business to Dufil Prima Foods. There is a big lesson here: if you build a strong moat, you can protect your castle. Indomie noodles built a moat and was able to defend itself from Dangote Noodles.
As you utilize, combine and recombine factors of production to create products and services to fix market frictions, you must acquire, develop and deploy upstream capabilities, to remain competitive in markets. Those capabilities must compound over time and must cushion strategic positioning.
How are you defending your business castle? Are you vulnerable to new entrants? What is your playbook? Are the capabilities compounding?
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