The Star Principle

The author says that there is a way to get more profit out of a business by finding a star venture. According to him the answer is not to work or invest in the great majority of ventures, the useful answer is not ‘people, people, people’. The really potent, consistently successful answer is ‘positioning, positioning, positioning.

Referring to the information given in the book A star business has two attributes:

· It is the leader in its market niche

· The market niche is growing fast, at least 10% a year.

For a niche to be a separate market, it must have different customer, different product or services and different way of doing business from the main market or other market niches. There is a business theory called strategy invented by BCG the growth/share matrix which says there are four types of business:

v STARS are Leaders in high-growth markets, they are not as big as cash cows; however, they are much more profitable.

v QUESTION MARKS are Followers in high growth markets, consume large amounts of cash, but because they have low market shares they do not generate much cash

v CASH COWS are Leaders in low-growth markets, These units typically generate cash in excess of the amount of cash needed to maintain the business

v DOGS ARE Followers in low-growth markets, are the companies that generate barely enough cash to maintain the business market share.

In the book are also mentioned some examples of star businesses like: Google which is a star business bigger than any other search engine, eBay is the star of person to person e-tailing and e payments, Yahoo, Skype,Amazon the largest online bookseller,Microsoft dealing with IBM became leader in software for PCs. The longest-running star business Coca-Cola, McDonald’s iso ne of the great stars of business. Koch stated that STARS are where the universe creates good fortune. Stars are the source of wealth, are the place to invest, the place to work.

Creating a new niche is like creating a new species by mutating an existing one. There are seven steps mentioned in the book necessary for creating a star venture:

1. Divide the market

2. Select a high-growth niche

3.Target your customer

4. Define the benefits of the new niche.

5. Ensure profitable variation

6. Name the niche you plan to lead

7. Name the brand in a way that complements the category name.

The book is really very interesting , it describes a powerful and convincing recipe for identifying star businesses. It is worth reading the book.

Flogerta Difaj