Focus summary

It’s a popular belief that the larger the company, the more value it has. But is that really true?

Sometimes, in fact, big companies with higher revenue have a lower value on the stock market than their smaller counterparts.

As we’ve seen, managers want to expand their companies so they can exploit the benefits of size. Luckily for them, there are several strategies to achieve exactly that.

One of these strategies is line extension. This means that a company expands to sell a variety of other products while using an already established brand name.

Nowadays it’s rare to find companies which operate only in one national market. Increasingly, most companies, big and small, follow the trend of globalization.

This is not surprising, as it’s now easier than ever for companies to trade globally. One reason for this is that globalization dismantles trade barriers. Treaties such as the General Agreement on Tariffs and Trade (GATT), the North American Free Trade Agreement (NAFTA) and the Asia-Pacific Economic Cooperation (APEC) effectively eliminate high tariffs and other trade barriers that can make importing and exporting expensive for companies. For example, NAFTA is an agreement between the United States, Canada and Mexico that lifts tariffs on trade and enables companies to trade freely.

So by now you’ve learned about how companies become unfocused and how that’s bad for them.

But is there a remedy? In other words, how do you refocus a company?

If you had a medical problem, like heart disease, would you go to a general practitioner or a cardiologist? Most people would chose the cardiologist of course, because medical specialists usually know more about their specialty than a general practitioner would.

And the same thing happens in business: customers prefer to use specialized companies because they trust their products to have the best quality.

Have you ever noticed something in your life that remained completely the same, forever?

No?

So far we’ve only discussed companies which have a single focus and perform excellently.

But there are also large conglomerates, with several brands, that don’t have a single focus and are still well positioned.

The key message in this book:

Although growth is usually the main goal of a company, it can often cause a company to lose its most important asset: its focus. Globalizing a company can diminish its focus, but specialization can often save a company. Also, specializing will help a company to succeed, because consumers are more likely to perceive that company’s service or product as being of higher quality.