Coursera INC

A Business Strategy Analysis

I have prepared a strategic analysis to assess the current competitive position of Coursera: “a social entrepreneurship company that partners with the top universities in the world to offer courses online for anyone to take, for free”. As a business, Coursera offers universities support in developing a new “educational service offer” in exchange of a profit sharing agreement on the newly generated revenue. While top tier universities often have a worldwide recognized brand, their ability to scale up operations and significantly expand their current output is limited. Coursera provides them with an environment to test, evaluate and fine tune their offer on a large worldwide audience at the minimum cost (for university) of producing the content. Coursera is able to provide the large worldwide audience by pitching to students a free online course from top tier universities.

The way Coursera is defining itself puts it therefore in the “educational services market” where its partners: universities are incumbents. Coursera shares profits made in this market without being the typical actor or directly competing with them but rather by helping its partners move the efficient frontier and gain market parts.

Universities are vertical integrated incumbents in a geographically, cultural and value based segmented market. Traditionally the educational services offered by universities were provided as a bundled package, on site, to a very limited number of paying customers (students). Geographic or cultural barriers impose transaction costs significant enough to prevent the prevalence of a “free market” in education. Market segmentation based on efficiency frontier separate top tier high cost high value universities from average cost value all the way to low cost low value offerings that might include unaccredited programs. The first disruption in the market was the distance learning pioneered more than 120 years ago that leveraged low printing and postal services costs and widespread literacy in order to offer scalability to educational services offering in line with society needs resulted from the technological revolution at the end of the 19th century. As technology evolved radio and television was used to enhance the distance learning experience in the mid-20th century. With internet and cloud services, the ability to provide worldwide on demand education leaded to the creation by universities of the first MOOC offerings.

Coursera’s specificity is that as a “for profit” organization it does away with the vertical integration model specific in this market. By partnering with incumbents Coursera avoids the high barriers to entrance (a sunk cost) educational services traditionally have on creating/providing the education programs. Coursera’s proposition to its high value/high cost partners is :

  • to leverage the low cost scaling capabilities of its MOOC platform (a disruptive technology) in order to be able to reduce cost and thus increase the market
  • to use the reputation of its partners  to attract the high number of “beta testers” needed in order to evaluate and improve (by statistic means) the educational offer and keep competitive advantage

By selecting top universities as partners it benefits from their reputation and avoids time &resource costs on brand build up. The large course catalogue and the number of partners offer Coursera bargaining power towards suppliers as it becomes a MOOC gatekeeper. Compared to vertically integrated MOOC platforms created by universities themselves, Coursera has a competitive cost advantage from the economy of scale that comes from sharing the same platform and a technological focus advantage as the platform is “the product”. The fact that Coursera uses a proprietary platform allows for some look in power over the partners. The fact that some partners are investing in open platforms will give them a better bargaining position and is a risk for Coursera.

 SWOT
 

Internal firm   capabilities

 Strengths Weakness
  • focus on platform development
  • proprietary platform
  • number and reputation of partners   signing up
  • scalability due to cloud architecture
  • HQ in Silicon Valley
  • proprietary platform
  • Dropout rate
  • Grading
  • Generating Income
  • Traditional approach to teaching
 

 

 

External Competitive

 Environment

 Opportunities Threats
  • platform is a high sunk cost for   incumbents trying to vertically integrate
  • media hype assuring free press
  • good bargaining position
  • market growing as continuous education   becomes necessity
  • Difficulties monetizing MOOCs
  • open free platforms
  • Certification
  • Course credit recognition
  • High expectances

 

Environmental Analysis
Demographic Trends Sociocultural   influences
Increasing number of   people requiring higher education as countries develop worldwide Global trade and   global market require standardization of education

Continuous education   becomes the norm

Technological   developments Macroeconomic   impacts
Internet facilitates   content distribution

Cloud infrastructure   allows for low sink cost  scalability

Cost of traditional   education increasing
Political/legal pressure Global trade issues
Education is highly regulated   and political pressure can be high Copyright issues may   arrive as offer is global but legislation varies

 

The effect of each of the five competitive forces in the firm’s industry is presented in the 5 Force Analysis table.  We consider open MOOC platforms a significant risk for Coursera. Mitigation of this risk require keeping a technological edge on the proprietary platform and to increase the number of partnerships as to benefit from look in power and deprive competitors of interested users thus limiting their efficiency.

5 Force Analysis
Entry Platform development   sunk cost is a deterrence  (+)

Cloud facilitates   scaling (-)

Monetization ability   is not yet certain (-)

Steep learning courve   (+)

Suppliers Traditional universities   are competing geographically (+)

MOOC competition is   global but in the high value end of the market (+)

Depends on its   partners gaining profits from MOOC. If revenue does not come soon enough Coursera   might disappear (-)

Rivalry Open MOOC platforms   (-)

Distance learning   providers (-)

Buyers Market growing globally   (+)

 

Substitutes Direct MOOC offers   from Universities (-)

 

Coursera’s capabilities were neither distinctive nor difficult to imitate as the company entered on an emergent phase of the cycle as a MOOC provider. However, the monetization issue and rivalry have limited the competition long enough for Coursera to gain ubiquity. That combined with a significant number of partnerships and the probable look in power will give Coursera a sustainable advantage.  As Coursera is making the educational services industry competitive on worldwide scale its ability to benefit from the induced rivalry will give it bargaining power over its partners.

Coursera should focus helping partners monetize the programs developed on the platform as it will insure income streams that will help secure VC financing long enough to allow it to benefit from the market growth phase that will eventually come. 

 

About Dr.A

Scientist, tech enthusiast, husband and father. Romanian expat. Dupa 3 ani in Japonia, o noua pagina se deschide la Paris.
This entry was posted in economie, educatie, tehnologie and tagged . Bookmark the permalink.

3 Responses to Coursera INC

  1. Verlie Morn says:

    Distance learning is a great advance forward in making education more accessible to millions of Americans who would simply not have the time or resources to obtain a college degree or technical certificate. It allows people from all over the country, even in remote or rural areas to plug into technology that lets them learn, at their own speed and on their own time.’..

    Enjoy your day

  2. Pingback: The MOOC challenge to Higher Education | Dr.A's Canapé

  3. Pingback: MOOC fail – Stanford Online | Dr.A's Canapé

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