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.

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.

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.