10 star principle

A lecture by Melih Arat – melarat.blogspot.com

The Star PrincipleHow It Can Make You Rich

Richard Koch



Cash cows

• Cash cows are companies with high market share, generate cash in excess of the amount of cash needed to maintain the business. Their growth rate is slow.


Dogs

• Dogs are the companies that generate barely enough cash to maintain the business market share. These companies are the followers in low growth markets.


Question marks

• Question marks are the companies growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash consumption.


Stars

• Stars are the leaders in high growth markets. They provide increasing and higher returns. They are not as big as Cash Cows, however they are much and more profitable than the Cash Cows.


A Star Business

• To be successful, you should start a star business, or be associated by a star business.

• A star business is the leader in its market niche; and the market niche is growing fast, at least 10 per cent a year.


Niche


W.W. Clements, a former CEO and president of the Dr Pepper/7-Up Company, described the taste of Dr Pepper as one-of-a-kind, saying "I've always maintained you cannot tell anyone what Dr

Pepper tastes like because it's so different. It's not an apple, it's not an orange, it's not a strawberry, it's not aroot beer, it's not even a cola.

It's a different kind of drink with a unique taste all its own."[2]

http://en.wikipedia.org/wiki/Root_beer

http://en.wikipedia.org/wiki/Root_beer

http://en.wikipedia.org/wiki/Cola

http://en.wikipedia.org/wiki/Dr_Pepper


Compound Interest• Compound interest arises when

interest is added to the principal, so that from that moment on, the interest that has been added also earns interest. This addition of interest to the principal is called compounding.

• A bank account, for example, may have its interest compounded every year: in this case, an account with $1000 initial principal and 20% interest per year would have a balance of $1200 at the end of the first year, $1440 at the end of the second year, and so on.

http://en.wikipedia.org/wiki/Interest

http://en.wikipedia.org/wiki/Principal_sum


How can you find a Star Business


• Your ideal product doesn’t exist. (coca cola)• Upmarket/downmarket (Could you create a luxury

segment of the market?) (Starbucks)• Affordable Luxuries (Lexus)• Mass market vs. Niche (Casio vs. Frank Muller)• Bigger Product vs. Smaller Product (SUV, Netbook)• Emotional vs.Functional (Belgo, Filofax)• Healtier vs. Tempting (Wholefoods vs. Gourmet

Burger)


• Safe vs. Racy (Volvo, Harley Davidson)• Convenience vs. Purity (Nescafe, Pure Jamaican Coffee)• Saving time vs. Extending time (mcdonald’s vs.

Slowfood)• Fixed vs. Mobile (Vienna Concert Hall vs. Ipod)• Unisex vs. Single Sex (B-Fit vs. Sports Universe)• Masculine vs. Feminine (Angelina Jolie)• Go gay (gay gym)• Go grey (universities for those 50+, oldcity club)


• Low vs. High service (capsule hotels, hotels by hours, 7 star hotels, IKEA)

• Personalized vs. untailored (Dell, HP)• Bundled vs. Focus (cancer hospitals, McCoffee)• Expert vs. inexpert users (Photoshop, Picnik)• Centralized vs. Decentralizde use (Hardisk vs. cloudcomputing)• Total cost vs. initial price (Toyota vs. Fiat)• First Place vs. Third Place (move the location of service)

(university at home)• Owned vs. rented vs. fractionall owned (Netjet-fractionally

owned private jets)


• Orchestrating a supplier alliance (alibaba.com, abebooks.com (No: 1 used books site)

• Go green (eco IQ magazine, organic milk, hybrid cars)

10 star principle

Business

Transcript of 10 star principle