When comparing a company that deals only with transportation of one type (e.g. railroad) compared to another that does shipping, airlines etc as well, how does that affect a company's ability to strike long term contracts with suppliers?
I read in an ER report 'X has been successful in winning long term contracts because it has established as a pure-play XX shipper rather than diversifying into different products'. Doesnt diversified product portfolio make the company more stable and perhaps more reliable as a long term contractor???
Think about this from the customer's perspective. Let's say you're shopping around for that one service you need. Would you rather buy from a firm that does that one service extremely well or does several things fairly well? Focus can be a good thing.
I was looking around for information like this and found the conglomerate discount (vs pure play) is on average -13.9% for diversified US companies from 1990-2012. In 2012, it was ~-10%.
look up BCG.perspectives,"Invest wisely, divest strategically"
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