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Archimedes once said
"If you give me a lever and a place to stand, I can move the world"
The best businesses are the ones that have optionality in terms of multiple levers that allow it to generate outsized returns for its shareholders.
"If you give me a lever and a place to stand, I can move the world"
The best businesses are the ones that have optionality in terms of multiple levers that allow it to generate outsized returns for its shareholders.
Lever 1: Potential utilization of unutilized capacities leading to any incremental revenues flowing directly to bottomline.
Lever 2: Product price elasticity. company selling a product whose price can be hiked higher than average inflation rate every year without the customers caring about it. Two examples from two extreme corners of spectrum. Relaxo Footwear & Starbucks Coffee.
Lever 3: Wider Acceptability potential. The leverage of selling a product in unchartered territories post domination of existing markets.
Ex: Mcdonalds having established its business model in the first 10 years grew subsequently by expanding in southeast Asian & european Mkts.
Ex: Mcdonalds having established its business model in the first 10 years grew subsequently by expanding in southeast Asian & european Mkts.
Lever 4: Potential & Mgmt inclination for backward integration. Visible in sectors like chemicals and pharma.
Ex: classic example is Vinati organics, company kept deepening its moat by doing constant backward integration and killing any current or potential competition.
Ex: classic example is Vinati organics, company kept deepening its moat by doing constant backward integration and killing any current or potential competition.
Lever5: Potential for leveraging company's distribution channel or customer network for pushing more products in adjacencies.Ex: Polymedicure through its existing networks could sell third party imported products to its customers. Much easier for them than any other new company.
Lever6: Brand Leverage Potential.
Ex: A brand like pepsi can acquire a product sold by a regional company and increase its product acceptance be a magnitude of 100x in the eyes of comsumers by just branding it under their brand umbrella.
Ex: A brand like pepsi can acquire a product sold by a regional company and increase its product acceptance be a magnitude of 100x in the eyes of comsumers by just branding it under their brand umbrella.
