Why a company needs specialization

During a recent management interview, we asked about revenue structure and profit margin for each product category.

This company distributes two types of goods:

• Commodities → thin margin, because customers can easily compare prices and switch suppliers.
• Custom-made products → margin can be 10x higher, because they require unique know-how and are harder to copy.

That’s the beauty of specialization:
👉 The harder it is for competitors to copy what you do, the higher your margins.
👉 The higher your margins, the more valuable your business becomes.

When analyzing a company, always ask:
“How easy is it to copy what they do?”
The answer often tells you a lot about future value.

If you’re curious how specialization impacts valuation, let’s talk 😊

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