ABSTRACT
Introduction How can a firm or an investor tell if one strategy is better than others? Since business strategies are usually about performance, a trivial answer to this question is to compare the profitability of each business and the one with the highest profitability is judged to have the best strategy. But suppose one of the businesses is a startup that is not yet profitable but has the potential to be profitable in the future. Better still, suppose one wants to find out what can be done to improve the profitability of a strategy. Only a detailed analysis of the underpinnings of profitability can unearth any hidden potential or faults that a strategy might have. Even better still, if an investor wants to invest in a startup that does not have a long history of steady earnings, profitability numbers are not likely to tell a good enough story. Existing frameworks such as the Balanced Scorecard, Porter’s Five Forces, Growth/Share matrix, SWOT analysis, the 7Cs, and other frameworks are useful in exploring different aspects of firm profitability. However, they are not integrative enough and therefore leave out important determinants of profitability potential.
