John Kay


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John Kay has been described as "the most important business analyst in Britain, bar none". He is well known for his incisive and entertaining columns in the Financial Times , his regular audio and TV broadcasts, and is much in demand as a speaker and consultant.

Books

The Business of Economics , Oxford University Press, 1996

Foundations of Corporate Success , Oxford University Press, 1993

Business economics

  1. Myth - 'Profits are higher in fast growing industries.'

    They're not, because everyone else knows they are fast growing. Returns are often higher in unfashionable activities, like tobacco . Best are industries that grow faster than expected - whether expectations are high or low.

  2. Myth - 'Most industries are concentrating around a few global companies.'

    Some are, some aren't. The overall trend of concentration has been down over the last twenty years - even in automobiles.

  3. Myth - 'A company can get the middleman's profit by vertical integration.'

    But it will have to pay for it - you don't save the highwayman's toll by buying his business. Vertical integration pays only when a company can use it to extend its market power, or take control of assets that are specific to its business.

  4. Myth - 'Diversification increases the quality of business earnings.'

    Sorry, but a company's shareholders can diversify more cheaply than it can. Brokerage commissions are a lot less than takeover premiums.

  5. Myth - 'New technologies increase profits.'

    If new technologies are generally applicable , then competition means that the benefits will go to consumers. Not just most of them, all of them. New technology has always been better news for customers than shareholders.

  6. Look at industry specifics, not assertions about trends.

    Few generalisations about industry structure stand up. You need to understand the specific nature of competitive advantage in each industry.

  7. Competitive advantages come from distinctive capabilities.

    The only way to make profits above the cost of capital in the long run is to do something others can't - and still can't after they see the benefits to the company that can.

  8. Myth - 'First mover advantages are key - the early bird catches the worm.'

    Not often, in business. There are very few industries in which being first is the basis of a sustained distinctive capability. How many of us have Ampex video recorders ?

  9. Myth - 'Market share is key to profitability.'

    High market share is associated with higher profitability. But that doesn't mean higher market share causes higher profitability. Sustainable competitive advantage is the source - the only source - of both higher market share and higher profitability.

  10. Beware financial engineering.

    Over the long run, the only place shareholder value can come from us cash generated by operating businesses.

www.johnkay.com



Global-Investor Book of Investing Rules(c) Invaluable Advice from 150 Master Investors
The Global-Investor Book of Investing Rules: Invaluable Advice from 150 Master Investors
ISBN: 0130094013
EAN: 2147483647
Year: 2005
Pages: 164

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