Comment by CWuestefeld
16 years ago
So as long as all big companies in a particular sector waste X on consultants, that's fine for the shareholder.
That's incorrect. As a shareholder, I can sell my stock and reinvest the proceeds into a company in a whole different industry. Thus, companies must compete for shareholders.
I don't think that's true because customers cannot arbitrarily change industries and so even a very inefficient industry can be just as profitable as any other. As a shareholder you buy profitability, not efficiency.
Of course the likelihood of a more efficient competitor entering a market becomes higher the more inefficient the incumbents are. There are more than enough examples for that.