The Profitability Test: Does Your Strategy Make Sense?

Paperback | August 19, 2016

byHarborne W. Stuart

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This book teaches readers to understand profitability in a systematic way, equipping them to provide logically coherent answers to questions about whether a new venture will be profitable, if changes in business strategy will generate an increase in profits, or if "staying the course" will result in continued profitability. Unlike books by business gurus that offer one-size-fits-all advice, this book starts from the premise that you, the reader, are in the best position to make difficult judgments about your business. It shows how to turn these judgments into coherent analysis, presenting state-of-the art theory for understanding business strategy from an economic perspective. The basic building block is the value that is created when the buyer and seller make a deal. In simple terms, if a company is to be profitable, it must make a favorable deal with each and every customer.

After setting out key principles and applying them to market situations, the book teaches readers to apply the analysis to their own businesses -- in other words, to create their own business game, the main ingredients of which are people and the value that they can create. It addresses how to integrate strategic moves into the book's theory of value creation and competition in order to address the sustainability of a company's profits, the effectiveness of the "invisible hand," and restrictions to competition. Optional appendixes explain the relevant mathematics.

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This book teaches readers to understand profitability in a systematic way, equipping them to provide logically coherent answers to questions about whether a new venture will be profitable, if changes in business strategy will generate an increase in profits, or if "staying the course" will result in continued profitability. Unlike book...

Harborne W. Stuart Jr., currently Adjunct Professor at Columbia Business School and School of Engineering and Applied Sciences, has held positions at New York University Stern School of Business, MIT Sloan School of Management, and Harvard Business School.
Format:PaperbackDimensions:224 pages, 9 × 7 × 0.56 inPublished:August 19, 2016Publisher:The MIT PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0262529408

ISBN - 13:9780262529402

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The Profitability Test is a significant contribution for scholars, instructors, and especially students. But it is a significant contribution also for the expert strategist seeking intellectual challenges. Top strategists have two virtues: great instincts and excellent discipline. After reading this book, I can't think of a better manual for sharpening these skills, especially discipline. In fact this is probably the most analytically rigorous strategy manual out there.