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Businesses to Invest in





There are 2 main types of Businesses

1)    B to C: - these businesses can be classified as business which sell generic products and one which sell branded products.

a) Generic Products: - These are businesses which are not able to create brand about of their products. Their only differentiation compared to their peers is price. High capital intensive, low margin and high working capital requirements to run it. Example Sun pharma

b) Brand Products: -Companies which create brands have pricing power which help them past on the cost high raw materials to its customers without impacting their margins. Low capital high margin and usually low or negative working capital required in the business. Example Abbott

2)    B to B: - these are business's which deal with other business's. These are 

a) Commodities business: -Commodities business make money when price of commodities rises. They are usually high capital intensive, highly volatile as business growth is determined by market demand. Example Tata Steel

b) Business with Intellectual property: -Business which supply products which are patented, or their products are differentiated via technological knowhow. Example Wabco

So, question comes out where we should invest. Business what have pricing power are the once which will continue to make money. Brands and Intellectual property helps to get pricing power and will always command premium.


Comments

  1. Anjali Guntuk20 July 2020 at 23:45

    Thanks for sharing such an amazing article, I am glad to know this information very useful.
    Algo Trading

    ReplyDelete

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