I just finished reading the The Dhandho Investor by Mohnish Pabrai.
I am sure most hedge fund executives have read it. I was surprised how arbitrage applies to my own business. The book brought up how a lot of profit is made from exploiting the price differences between markets.
Mohnish used an example of setting up the only barber shop between two larger towns and charging more for the service as customers only have to drive 17 miles to get their haircut. This works until competition moves in and neutralizes the prices. Except the fact the original shop already had a client base built up.
Does that apply to my business? In our case, we specialize in purchasing previous generation IT enabling our clients to buy the fastest servers, storage and networking. Which includes pickup, erasure, and remarketing for our corporate clients. While keeping the proprietary configurations confidential for our Hedge fund clients. We call this our white glove service. As no one wants their speed techniques compromised. So we take apart the servers and part them out in markets who place a higher value on last gen equipment. Who knew this is a form or Arbitrage.
The funny thing is, like the barber shop, we started selling components 25 years ago for the PC and Laptop industry. What changed? Apple, brought out the iPhone and iPad which stole a fair amount of market share from our previous segment. So we became specialists in the enterprise remarketing area.
If you look at your own business there may a form of arbitrage. So how can you benefit from it?
Link to the book http://www.amazon.com/Dhandho-Investor-Low-Risk-Method-Returns/dp/047004389X/