Technology Development and Competitive Advantage: Sustainable or Short Term?

Marsden, John O.
Organization: Society for Mining, Metallurgy & Exploration
Pages: 11
Publication Date: Jan 1, 2004
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. BACKGROUND The development and adoption of new technology has played a crucial role in the commodity minerals industry throughout history. As new, cost-efficient technologies are commercialized, the cost of production decreases, and this enables lower grade ore to be processed profitably. This in turn increases the availability and supply of the metal or mineral of interest, and ultimately (in a free market environment where the supply- demand balance determines price) inevitably decreases the metal or mineral price. This leads to the question: Why should mining companies invest in (new) technology development if the result is a decrease in the product price? The answer is to achieve competitive advantage, where the application of new technology enables one or more
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