Businesses that don’t have anything special going for them (such as new or better products, well-known brand names, or strong competitive positions) are likely to earn only average or below-average returns on capital. If there’s nothing special about a company’s business, then it’s easy for someone to come in and start a competing business. If a business is earning a high return on capital and it’s easy to compete, eventually someone will! They’ll keep competing until returns on capital are driven down to average levels.
