Unfortunately, there is no single route to success in business and stock investing. Sometimes, entirely contradictory approaches produce equally creditable results. The ‘specialization versus integration’ debate is an example. Some of the world’s best corporations remain sharply focused on a narrow business definition. Others build value for their stocks through horizontal integration.
Customers are best placed to determine the optimal focal length of business scope. Careful analysis of a decision-making model can reveal how broad a range of products and services should be. A vegetable market cannot specialize in tomatoes alone. However, an expectant mother would hardly care to visit a second clinic just because she has developed gestational diabetes.
Stock investors should look for reasoning rigor in executive briefings about their core strategies. One of the world’s most reputable management consultancies has recently postulated that hospitals should specialize in order to survive. Stock investors who are into equine sports will agree with the ‘horses for courses’ adage. The ultimate question is of consistency between planning and execution.
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