We've covered a lot of ground so far. We began with defining strategy. Strategy as a set of integrative choices that position the firm towards superior performance. We also analyzed why some industries are more profitable compared to others. The use of the Porter's Five Forces framework helped us understand that the average profitability of an industry is a function of those five forces. If the forces are strong, the average profitability of the industry players will be low and vice versa. But the Porter's Five Forces framework did not explain the intra-industry differences in profitability. Within the same industry, there is variability, there is variability in firm profitability. We use the resource-based view of strategy to understand why this may be the case. The resource-based view of strategy argues that the intra-industry differences in profitability is driven by firm's possession, or the lack of it, of valuable resources. In fact, valuable resources are the bedrock of competitive strategy and firm performance. We move forward by defining what do we mean by competitive advantage. Strategy is all about winning, and a winner has competitive advantage compared to other firms. The firm has competitive advantage if it was able to create more value compared to other competitors. Well, there are only two ways to create more value, increase the customers' willingness to pay and decrease the suppliers' willingness to sell. We also explored the key principles of a value-based strategy. A firm following a value-based strategy focuses on creating more value for everyone, for its stakeholders, customers, suppliers, employees. And thus, increases the length of the value stick. On the other hand, a firm primarily focused on a profit-based approach prioritizes firm's profit over value that it can create. Value-based strategy is a powerful way to think about competitive strategy. We also learned that a firm implements its strategy through business model. Business model is the logic of the firm. And it consists of four key elements, customer value proposition, resources, processes, and profit formula. Firms compete with each other on the basis of business model. As we saw how Amazon competes with Walmart, a good business model needs to be aligned with the firm strategy, needs to be self-reinforcing. And needs to be effective in the long run. In this module, you'll use the concepts you've learned so far to think about growth. Yes, growth. Growth remains the number one priority for companies. Phil Knight, the founder of Nike, famously said, you grow or you dry. Growth is absolutely critical for firms to survive and prosper, to keep the employees happy, to address the need of the key stakeholders. Yet, research suggests that growth is not easy to come by. So many companies fail to grow. Even those that grow are not able to replicate success over the long term. Our goal is to look at different ways in which firms can grow. Just to preview, a firm can grow through diversification, either product market diversification, or through geographical diversification, or through vertical integration. A firm can grow organically, that is through internal development and innovation, or even grow inorganically through acquisitions, alliances, or joint ventures. In this module, we'll use some useful frameworks to help us assess the following questions. When does diversification make sense? How should a firm choose between building internally versus acquisitions versus alliances? How can a firm grow sustainably over a long period? We will close the module by looking at a very interesting case study on Facebook's acquisition of WhatsApp. Facebook paid an astronomical sum of $22 billion 2014 to acquire a messaging app with hardly any source of revenue. We should use the concepts learned in this course to assess whether the acquisition made sense or not. Facebook was facing a growth problem and the company decided to address the growth issue through this particular acquisition. Did it consider other alternatives? Was this acquisition the right way to proceed? These are some of the questions you're going to ask in this case. That's coming up later.
