We used our proprietary alternative data engine to compile this list of the competitive advantages that S&P 500 companies report in their SEC filings. Here are eight ways that S&P 500 companies stay at the top of their industries.
Coca-Cola is perhaps the world’s most recognizable brand, with popular taglines like “open happiness” and “share a Coke with” that engage and captivate consumers on a global scale. This brand equity is immeasurable, and a serious competitive advantage for any firm. MGM Resorts International (think Las Vegas, casinos) and L Brands (parent of Victoria’s Secret, Pink, and Bath & Body Works) are other companies that cited brand recognition as a competitive advantage. In recent years, consumers have become increasingly loyal to brands, so brand recognition increases customer lifetime value (CLV) and customer lifetime return on investment (CLROI) metrics for these firms.
When firms position themselves to lead on some or all fronts, they become an example that other companies follow and imitate and are often movers and shakers in their industry. This is a competitive advantage, and tons of firms in the S&P 500 recognize that. For example, Colgate-Palmolive cites “leadership and innovation in promoting environmental sustainability and community well-being." Clorox noted being recognized for its "corporate responsibility efforts” in a 2021 8-K.
In the work from home era, employees are experiencing burnout more than ever – a study conducted by Indeed indicates that 52% of American workers are affected by it. Further, more workers are speaking out, with the viral Goldman Sachs deck as a prime example of a stressful, toxic work environment that can no longer be compensated for with big salaries and paid dinners after 8. Vertex Pharmaceuticals cites an 11-year streak on Science magazine’s “Top Employers List” and recognizes the positive effects of a healthy work culture.
Creating strong work cultures requires people, and the right people. Finding talented workers to drive your company is not an easy task, and the companies with methodical, replicable strategies to recruit and retain talent tend to come out ahead. In a 2020 SEC filing, Norwegian Cruise Line Holdings describes wanting to be “an employer of choice for individuals with specific skill sets and experience required in the cruise line industry” and a detailed process through which they evaluated which companies they may compete with for top talent.
Companies do not exist without customers, and recognizing who your consumer is, what their core and augmented products are, and the value you can provide, is a huge advantage. More often than not, firms fail to maximize sales and satisfy customers. Delta Air Lines wrote “people and service are our strongest competitive advantage” in their 2020 10-K – they clearly see that creating something that exceeds expectations will win every time. Similarly, International Flavors and Fragrances says their ability to react to changing consumer tastes quickly sets them apart from competitors.
Consumer preferences change, supply chains are disrupted, and bad press happens to every firm. Whether firms list all their products under one brand (ex: GE) or take a house of brands approach (ex: P&G), having a strong mix of industry leading business only helps. Kraft Heinz is a prime example of this, citing a “diverse mix of iconic and emerging brands,” meaning that their strength comes from all parts of the BCG Growth Share matrix, and they have plenty of room to grow. In a different industry, Prudential Financial Corporation boasts a diverse mix of product offerings which is so valuable because of their ability to catch consumers in all stages of life – initial bank accounts, investment plans, retirement funds, life insurance, etc.
Having a strong 10-year plan in mind is an advantage, and companies like Alphabet (Google) and Lamb Weston Holdings who include growth of revenue and market capitalization tend to come out ahead. Tangible short-term goals motivate employees, while long-term goals create a shared sense of purpose, especially when they are growth oriented.
Cash is king, and the ability to maintain strong financial condition as the economy moves and grows is a serious competitive advantage for firms, no matter the industry. While it is useful for the company itself in pursuing modern technologies or acquiring talent, it is also another metric that signals potential shareholders to invest. Apple is infamous for having massive amounts of cash on hand, reporting $195.97 billion in a 2021 Q1 report. Essex Property Trust, a real estate investment trust, also boasts strong financial condition in a 2020 report.
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