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“What Is the Theory of Your Firm?”

The main concept of the article is a corporate theory, which focuses on identifying the specific traits and needs of the company and using them to achieve a stable position in the market. The author emphasizes that an effective theory “identifies those assets and activities that are rare, distinctive, and valuable” (Zenger, 2013, p. 78). Thus, the company needs to use a visionary perspective, the use of internal and external resources, and the combination of a wide range of activities in the same area. Failure to develop effective corporate theory leads to additional costs and reduced efficiency.

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An example illustrating this concept in the US is the extremely popular streaming service Netflix. First and foremost, the company has evolved from a DVD distributor to the world’s largest digital video content provider. This process is characterized by the development of an effective corporate theory. First of all, Netflix offers a new perspective on the industry, which makes the company a visionary in the field of streaming services. The company also uses foresight, which evaluates the industry and consumers’ demands to keep its activity relevant. Thus, the company understands what tools and resources it will need in the future to create value. Additionally, Netflix uses insight that allows the company to assess internal activities and opportunities. Thus, they continually improve their performance in order to meet the needs of their clients. Cross-sight suggests that a company is seizing opportunities to advance in a broad area or related industries. Netflix follows this rule, as recently it has been actively producing its content along with the provision of streaming services.

Thus, the corporate theory described in the article can be well illustrated by Netflix. This business constantly investigates not only the current but also the future state of the market and tries to use internal resources to maximize the value of its activities. Moreover, the company’s management is well aware of the need to expand the field of activity and change the direction of business when necessary. Thus, the corporate theory of the company is effective and allows it to expand and strengthen its position in the market.


Zenger, T. (2013). What is the theory of your firm? Harvard Business Review. Web.

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