Concentration and Leadership

 

Mere competence is every business’s price of admission. If we are not competent we will not be allowed to play in that arena.

Concentration on and leadership in a specific market segment often leads to higher profits than other members of the industry. Strong profits come from having a leadership position in an area highly valued by the market, and is is reflected by a strong gross margin. The market may place a high value on the product, the service or the way it does business.

Failing to be a leader, the business becomes one of many. It becomes average, undistinguished. Average businesses don’t have a long life. Poor business conditions drive them out of the market, and their life span is limited.

A position of leadership may be created by concentration. This means concentrating efforts on the smallest amount of resource that will yield the largest amount of revenue. It means reducing the amount of products to those that contribute the largest profits, as the others merely add to costs. It means reducing staff activities to those likely to generate large revenues.

A business should concentrate and focus its scope and its resources. It cannot and should not serve everyone. Concentrate on those you want to serve and profits will follow.