Occupations and Competitive Advantage

A barber cuts hair. How much does he earn ? At current economic conditions in India, in cities like Chennai, barbers get around Rs 30-50 per haircut.

Now if he decides to improve in life, what can he do ?? An immediate solution which comes to mind is improve his shop, make it air-conditioned, rephrase his work as "Hair-Stylist" and move over to an upmarket area visited by high-class people. By doing all that, he can hope to get Rs 100-200 per hair-cut. That's about it.

Now consider a Dermatologist. He also provides solution for hair problems like Dandruff, Hair-fall etc. But how much does he earn. At current rates, we might end up shelling out not less than Rs 300-400 per appointment. But having visited a dermatologist once, we are not likely to visit him on a sustained basis. So how can the dermatologist hope to get a sustained income ??

He can provide a End-to end Hair Solution by making an arrangement with some Preferred barber, whom he can recommend to his patients for their Hair-cut. Thus, patients who end up at the barber shop due to the doctor's recommendation end up increasing the barber's business and so, the barber has to plough back a portion of his revenue to the doctor. The doctor ends up creating another revenue stream from a totally unconventional source namely the barber.

Other sources of income that can be thought out by the Dermatologist is a tie-up with the preferred pharmacy, preferred medical company for his medicines, shampoos and so on. Thus each one of the channels turns out to be revenue spinners apart from the regular patient clientele.

Becoming a barber does not involve significant investment of money or skillset. So, anyone who has a aptitude for learning can catch up pretty soon. This makes hair-cutting very vulnerable as a occupation. In short they don't have a sustainable competitive advantage. This also explains why they cannot demand exhorbitant rates for their services. This is not so in case of Dermatologist where that profession has a entry barrier in the form of a long education and hence makes it easier for them to jack up their consultation fees.