Like a lot of people, I`m interested in the overall context of today`s collapsing economy. It`s okay to wonder about it all, but the real use is to see what kind of trend analysis and predictions we can generate. One prediction is that I think we`ll go through at least a decade of reverse events from what we`ve seen in the 80s and 90s.
Think about the great mergers and acquisitions rage of the 80s. Companies couldn`t figure out how to make money through products, so they bought up other companies to add those profits to the master bottom line.
The result has been fewer and fewer mega-corporations controlling hundreds of subsidiary divisions. It`s like a pyramid.
The major problem with this strategy is that companies have lost touch with their core business. Food companies now own airlines, theaters, electronics companies, and so forth. Accountants run the world!
I think what we`re about to see is a massive divestiture---a great splitting up of thousands of companies. Think about the automotive industry. One major company like GM bought out all the other, minor brand names.
Another example is buying a CD drive for a computer. There may be a number of different company names on them, but they`re ALL made by only one or two corporations.
Suppose you want to own a car company. Right now you probably can`t because it costs so much to enter the field. But what if GM begins selling off entire subsidiaries? What if they simply sell "Buick" as a whole separate company? It`d sure be cheaper to buy just that old brand than to start a car company from scratch.
All this comes down to a fundamental principle I`ve been seeing. There`s a total difference between selling a real product or real service, versus pretending you`re making money by cutting costs and boosting the operational bottom line. Selling a candy bar is entirely different from cutting the costs of making that candy, then claiming you`re "earning" money.
The result will be that instead of 1 company owning 5,000 movie theaters, I think we`ll start to see a break-up. As those publicly-held major companies start to go broke, they`ll continue with their "operational profits" strategy. They`ll start getting rid of the individual theaters that aren`t "making money."
That means 1 person can buy 1 theater in 1 town.
A lot of this comes down to another question. How much money do you want to earn each year?
If you`re a corporation, there`s no answer other than "more than last year." But if you`re passionate about movies and only want to own your own theater, then you likely could be happy with say, $80,000 per year.
I believe that this move toward break-ups, divestitures, and fragmentation is going to do two things. First, it`ll fuel the fire of "buy local," an emerging battle cry of exhausted consumers.
Secondly, it`ll re-focus the business world on quality, creativity, personalization, and unusual products. We`ll start to see the end of the mass-produced junk we`ve been living with for the past 25 years.
And that means lots of opportunities! The niche market business owner will begin to thrive again. Art, crafts, hand-made products; those too should thrive. With Internet distribution, a mom-n-pop store can sell to the whole world.
Now, with big companies about to get rid of pieces as those big companies start to collapse under their own bloated weight, I think it`ll open the door for even more diversification of goods and services.