There are impacts of relying only on a single
type of industry for a nation’s competitive advantage, some of them are
There will always be unpleasant surprises.
A development is not as promising as
expected. A mining company with fixed revenues suddenly faces failure at one of
its locations. Even leaders like Steve Jobs can create uncertainty when medical
issues affect their performance. The bottom line is that any industry or
investment can be hit by an unpleasant surprise. When using a single type of
industry, the above cannot be avoided and the damage will be huge.
It provides measure away from activities that may go down.
Sometimes the industry will decline for a while due to economic
aspects. Then there are times while the industry will be completely rejected or
removed. After all, when was the last time you went to buy a yoke and plow for
your cattle? When you focus on a single type of industry and the market is
going through the above situation, the industry may collapses and there is no
backup plan for it.
It is influenced by the cyclical nature of the econometrics.
Economies are growing and economies are slowing. When that
happens, people change their spending behaviors. When money is very tight,
there will be fewer new cars bought and fewer new debts and loans going to home
buyers. When the money is more presented and available, then the luxury items
are more likely to be bought. Focusing on a single type of industry doesn’t allows the portfolio to face these cycles
because little is owned in many businesses so some of things are always up
(active) while others are always down (not active).
Companies are subject to analysis by many different groups of
stakeholders, including, suppliers, customers, employees, analysts and
investors. Focusing on a single type of industry strategy can generate negative
perceptions by demonstrating that the company is not innovative nor ambitious.
Which will not help to attract new investors or retain employees, or to build
relationships with industry analysts.