In Focus

Explaining Industry

Note: This article focuses on Step 3 of the Chicks' Dozen. For articles focusing on other Steps, see the links listed at the bottom of the page.

Explaining the Industry the company you're researching fits into is either ridiculously simplistic, or incredibly mind-boggling. It all depends on the subject matter and whether or not it's something with which you're familiar. Let me explain.

If you're a new mom, you've definitely had some experience in the diaper industry. Matter of fact, you've researched the smell out of diapers. (Ooooo, if only that were possible.) You've delved into everything from cloth to paper, from Velcro to tape. You know all the sizes, shapes, colors and costs.

Or maybe you're a career woman who relies heavily on computers. You've explored the Dell out of computers, from the Compaq to the IBM, or the Gateway to the Apple. You can easily define who makes what and with how many Megabytes; or if it has CD-ROM, DVD, ABC or 123. (Can you guess which category I fall into?).

Familiarity makes a difference. The new mom may be less certain about the future of the computer industry and whether or not it's expanding. Vice-versa, the career-woman may have no knowledge as to whether or not the diaper industry is exploding. (Ish... did you get a visual, too? Nuff said.)

To keep this as simple as possible, let's check out two well-known companies representing both industries. Proctor & Gamble makes Pampers, right? Right. But it doesn't end there. They also manufacture products such as Cover Girl, Vidal Sassoon, Noxzema, Pringles, Folgers, Vicks, Crest, Tide, Cascade, Charmin, Tampax and much more. The list seems endless. If you get a minute, check out their website at www.pg.com. You'll see that they are an enormous company with a plethora of goodies that you probably never even knew they made. Now ask yourself: Do I see a bright future for this company? Will they continue to grow? I'm sure the answer is YES.

How about IBM? The novice would think they simply made computers. The informed individual, however, would say that's a small piece of a much bigger pie. They also manufacture notebooks, software, printers, hard disk drives and much, much more. They also work very closely with the government and a multitude of businesses providing "Business Solutions." Just check out their website at www.ibm.com. Now you can ask yourself that same question: Do I see a bright future for this company? Will they continue to grow? (Don't worry, my mother always says there's nothing wrong with talking to yourself... as long as you don't answer!) Once again, I'm sure the answer is YES.

What it comes down to is this: your opinion on the growth and future of the companies you are researching. It helps to check out their specific web pages and learn a little about them. There can be some surprises. Once while on the Chicks Dozen Egg Hunt and I came to Step #3 (Industry) only to find out the company I was interested in was privately owned. This step will let you know whether to continue on to Dozen Step #4 or just toss the entire carton.

Remember Chicks, if Step #3 is a strike, it's out. But if it's in the zone, you could be one step closer to the Golden Egg!

Thank God for big girl panties.

Articles focusing on the 12 Steps of the Chicks' Dozen:

Step 1: Buy What You Know

Step 2: Keep It Simple, Sister (K.I.S.S.)

Step 3: Industry

Step 4: Leader In It's Field

Step 5: Repeat Profitability

Step 6: Gross Margins, GM: Service Related Industries

Step 7: Net Margins

Step 8: Cash To Long-Term Debt

Step 9: Flow Ratio

Step 10: Increasing Growth

Step 11: Strong Management & Operating History

Step 12: Buy On Sale