Technology Development and Competitive Advantage

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Technology Development and Competitive Advantage: Sustainable or Short Term?
By John O. Marsden Phelps Dodge Mining Company, Phoenix, AZ Technology development has played a crucial role in the minerals industry throughout history. The development of new technology allows mankind to produce metals and minerals at progressively lower cost of production in real terms, and therefore at progressively lower prices, improving their availability, accessibility and utilization worldwide. However, the developers of such technology are not guaranteed to reap the benefits from this effort: There is an expectation that technology developers will gain an advantage over their competitors. Is this a short-term benefit that results from a temporary cost or efficiency improvement, or is it a sustainable longer term “edge” that prevails even after metal or mineral price has been eroded by the implementation of a major step change technology? This issue is examined by reference to several case study examples in the copper industry. modity producers to gain a cost advantage over their competitors, at least for a period of time. The more sustainable and longer term, the greater the competitive edge achieved. Technology development is costly and, in general, the greater the potential benefit, the higher the cost. The commercial implementation of new technology is inherently risky — the technology has not been applied before and must be proven over time. The risk must be managed, and this involves additional cost and intellectual effort. Finally, both technology development and commercial implementation typically requires significant investment of time. This latter factor is significant where the metal/ mineral of interest is a commodity that exhibits cyclical pricing with extended periods of depressed pricing followed by periods of strong pricing. This will be discussed further later. and…...

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