Revisiting the Concept of a Competitive 'Cash Advantage'
Strategy & Leadership, Vol. 43, No. 4, pp. 38-46, 2015
Posted: 6 Jul 2015
Date Written: July 5, 2015
Purpose of this paper: This paper profiles how ample cash holdings can serve as a competitive advantage by first mitigating the risk of becoming a forced seller during periods of distress, and then positioning a firm to take strategic advantage of forced selling and other forms of distress-generated opportunities.
Design/methodology/approach: This paper profiles the changing role of cash over time in corporate strategy, and how inadequate/strong cash positions have caused or contributed to corporate failures/successes.
Findings: The findings of this paper, which are supported by historical and contemporary examples, are that ample cash reserves can be a powerful source of competitive advantage for certain firms. Research & Practical limitations/implications: This article supports earlier work published in Strategy & Leadership that shows how Graham and Dodd-based analysis is a viable avenue of academic research and a viable method with which to assess and formulate corporate strategic initiatives such as mergers and acquisitions, share buy-backs, risk management and, in this case, the strategic uses of cash.
What is original/value of paper: This paper offers leaders and financial executives a practical explanation of how ample cash holdings can serve as a competitive advantage.
Keywords: Competitive Advantage, Cash Management, Strategic Analysis
JEL Classification: D21, L10, L20
Suggested Citation: Suggested Citation