In corporate finance you come across theories saying that if you're not as good as your competitor you might be destroying value in certain sectors. This is the case in most natural monopolies (like electricity, water) and certain other sectors where scale is large (like say, cereals). I've asked the question to myself- if a company knows that it's not going to be the best at something why try at all? Why not join these huge corporations and help reduce costs by increasing their scale? If you're worried that these corporations are evil you can either join one of the regulators (which regulate competition/financial markets/whichever area you think they're too evil in) - given that you feel these people add enough value and compensate fairly for your work. No company can systematically do evil things and still be hugely successful anyway. The numerous cases that we here of are companies which do certain things like exploiting poorer economies' labour instead of hiring local people, underpaying wages etc. - but these are just normal decisions making economic sense- which hurt some people but benefit others. One could however argue that big investment banks are truly evil(funding terrorist related activities/helping with money laundering etc. ) but this is probably the only sector (perhaps along with law firms) where even the most successful firms can do truly evil things.
Coming back to the point- although I've thought of why mediocre companies try and compete with established ones for eg. Parle competing with Coke and Pepsi or Tata competing with Ford and BMW(in sectors where acquisition is common, it makes sense to have a local competitor- since the strongest competitors are usually taken over- examples of such sectors include technology, telecom etc. ), I have never asked the same question about human beings. But what do companies and human beings have in common? Well, everything really. Countries and companies are considered as individual human entities in media, when doing political/corporate analysis and even by law. While it might seem absurd to compare a country of millions of people, industries and companies to an individual person who is just composed of himself, it really is not that big a deal. In the top down approach, it makes sense because after all human beings are made up of billions of cells and hundreds of muscles and dozens of liquids- yet we do not analyse these things when talking about a person.
The guy who comes 8th in class(who wants to get into academics) is not asked to kill himself. And the coder who came 3rd in the computer coding event isn't asked to either. We have a hundred reasons to give these people in their moments of truth to tell them that they are special and unique and how they contribute their own bit to the world just by being themselves. Just think about it- if people in the stone age(or whenever) were happy with eating raw food and no one questioned it we would still not have invented cooking. And small things like this make your existence worthwhile. If you're a person who gets angry quickly it reminds the calm people to get angry once a while as well to get things done. And it reminds them perhaps how great other calm people are and makes them love these others a bit more. There is no good without evil and no progress without questioning the status quo. It doesn't matter in what way you're different from others- you are still adding something to the world (as long as you're not in ISIS and killings hundreds by the day). The advice goes something along these lines. The same applies to companies as well I believe.
Another comparison between companies and people is with respect to margins/capabilities of a person. We all hear a lot about the lazy guy/girl who doesn't work hard enough. (While this comparison does not have any underlying causative similarity- it is something that can be empirically observed.) Success for a person is a mixture of capabilities (which may be intelligence, talent in some field etc.) and hard work. The hard work and the capabilities might come for certain other things such as motivation by parents or training or natural DNA etc. but this is the bottomline. And the bottomline for companies is the ROA/ROE. ROA depends on asset turnover and margins. Margins show the capability of the company to charge high and sustain demand, and turnover shows the amount of work they out in- high asset turnover means that the company works hard to push a large number of products on to the customers. (ROE is closely dependent on ROA- applying leverage on ROA gives ROE). Of course success can be defined as being helpful to others in the case of human beings and contributing to the society in case of corporations, but I'm talking about financial success.
Coming back to the point- although I've thought of why mediocre companies try and compete with established ones for eg. Parle competing with Coke and Pepsi or Tata competing with Ford and BMW(in sectors where acquisition is common, it makes sense to have a local competitor- since the strongest competitors are usually taken over- examples of such sectors include technology, telecom etc. ), I have never asked the same question about human beings. But what do companies and human beings have in common? Well, everything really. Countries and companies are considered as individual human entities in media, when doing political/corporate analysis and even by law. While it might seem absurd to compare a country of millions of people, industries and companies to an individual person who is just composed of himself, it really is not that big a deal. In the top down approach, it makes sense because after all human beings are made up of billions of cells and hundreds of muscles and dozens of liquids- yet we do not analyse these things when talking about a person.
The guy who comes 8th in class(who wants to get into academics) is not asked to kill himself. And the coder who came 3rd in the computer coding event isn't asked to either. We have a hundred reasons to give these people in their moments of truth to tell them that they are special and unique and how they contribute their own bit to the world just by being themselves. Just think about it- if people in the stone age(or whenever) were happy with eating raw food and no one questioned it we would still not have invented cooking. And small things like this make your existence worthwhile. If you're a person who gets angry quickly it reminds the calm people to get angry once a while as well to get things done. And it reminds them perhaps how great other calm people are and makes them love these others a bit more. There is no good without evil and no progress without questioning the status quo. It doesn't matter in what way you're different from others- you are still adding something to the world (as long as you're not in ISIS and killings hundreds by the day). The advice goes something along these lines. The same applies to companies as well I believe.
Another comparison between companies and people is with respect to margins/capabilities of a person. We all hear a lot about the lazy guy/girl who doesn't work hard enough. (While this comparison does not have any underlying causative similarity- it is something that can be empirically observed.) Success for a person is a mixture of capabilities (which may be intelligence, talent in some field etc.) and hard work. The hard work and the capabilities might come for certain other things such as motivation by parents or training or natural DNA etc. but this is the bottomline. And the bottomline for companies is the ROA/ROE. ROA depends on asset turnover and margins. Margins show the capability of the company to charge high and sustain demand, and turnover shows the amount of work they out in- high asset turnover means that the company works hard to push a large number of products on to the customers. (ROE is closely dependent on ROA- applying leverage on ROA gives ROE). Of course success can be defined as being helpful to others in the case of human beings and contributing to the society in case of corporations, but I'm talking about financial success.
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