theonline.mba
← Back to OMBA 101

OMBA 101 · Unit 1 of 6

How Businesses Create Value

Business Foundations and Managerial Thinking

Start unit · 5 lessons →

Learning objectives

After completing this unit, you will be able to:

  • Explain why firms exist and when markets beat internal coordination
  • Describe how businesses create, deliver, and capture value
  • Map stakeholders and their competing interests on a single decision
  • Explain how finance, operations, marketing, and other functions interact
  • Read a company as a system with feedback loops, not a org chart

Why this matters

Before you optimize a funnel, restructure a team, or pitch a strategy, you need a theory of what a business is for. Unit 1 builds that foundation. Managers who skip it treat symptoms (slow shipping, weak margins, talent churn) as isolated problems when they are often linked through value creation, stakeholder tradeoffs, and system dynamics.

Unit overview

Work through the five lessons below in order. Each is a full textbook-style section with worked examples and practice problems.

#LessonCore idea
1Why Firms ExistTransaction costs, firm boundaries, make vs buy
2Value Creation, Delivery, and CaptureWhere value comes from and who keeps it
3Customers, Employees, Owners, and Other StakeholdersCompeting claims on the same P&L
4Business Functions and How They InteractHow work flows across functions
5Reading a Business as a SystemStocks, flows, and unintended consequences

Connection to applied work

Pick one company you know well (employer, client, or public firm) and carry it through all five lessons. By the end you should have a one-page system map: who creates value, who captures it, which functions interact on the bottleneck, and where stakeholder incentives conflict. That map becomes the opening section of your OMBA 101 applied project.

Practice

  1. Draw firm boundaries for one activity: what is in-house vs contracted, and why?
  2. Identify one moment where the company created value but failed to capture it (or the reverse).
  3. Name two stakeholders who want opposite outcomes on the same metric this quarter.
  4. Trace one customer complaint through at least three functions before it is resolved.

Knowledge check

  1. What are transaction costs, and when do firms beat markets?
  2. What is the difference between creating value and capturing value?
  3. Why do stakeholder maps matter for prioritization?
  4. What is a feedback loop in a business system?
  5. How will Unit 2 (business models) build on this unit?

Key takeaways

  • Businesses are coordination systems that exist when internal work beats market contracting.
  • Value creation without capture is charity; capture without creation is unsustainable.
  • Every major decision reallocates value among stakeholders.
  • Functions only make sense in relation to each other and to customers.
  • Start the lessons above; unit assessments on this page come after all five.

Unit assessment

Complete each section below. Score 80%+ on the quiz to finish this unit's assessment.

40% applied project35% knowledge checks25% reflections

Exercises

Apply what you learned in this unit with structured practice.

ExerciseApplied practice: How Businesses Create Value45 min
Complete a focused practice exercise on **How Businesses Create Value**. 1. Choose a real company, product, or situation you know. 2. Apply one core framework from this unit to analyze it. 3. Write your analysis in 300–500 words with a clear recommendation. 4. Cite at least one credible source.

Deliverable

300–500 word analysis document saved to your portfolio under OMBA 101.

Rubric

  • • Framework applied correctly (not just named)
  • • Specific evidence from a real example
  • • Clear recommendation with tradeoffs acknowledged
  • • Professional writing with source citation
ExerciseDrill: How Businesses Create Value30 min
Work through the practice problems in the unit lesson without looking at notes. Then check your work against the lesson and write a short reflection: - What you got right - One mistake you caught - One concept to review before the next unit

Deliverable

Problem solutions + 150-word reflection in your OMBA 101 workbook.

Rubric

  • • Attempted all practice items before checking answers
  • • Honest reflection on errors
  • • Identifies a specific review action

Memo / written deliverable

Write a concise managerial deliverable for this unit.

MemoExecutive memo: How Businesses Create Value50 min
Write a one-page executive memo applying **How Businesses Create Value** to a business decision. **Format (SCR):** - **Situation:** Context in 2–3 sentences - **Complication:** What problem or opportunity exists - **Resolution:** Your recommendation and rationale Maximum one page, 12pt font, no appendix.

Deliverable

One-page PDF memo uploaded to your portfolio.

Rubric

  • • SCR structure is clear in first 30 seconds of reading
  • • Recommendation is specific and actionable
  • • Evidence supports the conclusion (not just opinion)
  • • Concise: no filler paragraphs

Knowledge quiz

Check your understanding before marking the unit complete.

1. According to Ronald Coase, why do firms exist instead of coordinating all activity through market prices?

2. Harborline Manufacturing's static three-year unit cost favors buying from Apex, but leadership still considers insourcing during frequent design changes. Which Coase condition best explains the shift?

3. CloudMint has strong NPS but negative first-year contribution after implementation and CAC. Which corner of the value triangle is weakest?

4. A merchant estimates HarborDesk prevents 70% of $40,000 monthly downtime cost. What does this estimate primarily anchor?

5. A SaaS company raises prices 8% while cutting support headcount 15%. Using the stakeholder tradeoff lens, what is the most likely short-term vs long-term tension?

6. Retention is weak and Customer Success is blamed. Per the revenue engine chain, what is the best first diagnostic move?

7. A company celebrates a surge in new customer signups while support backlog grows and churn rises two quarters later. Which system concept best explains the delay?

8. Goldratt's Theory of Constraints says improving a non-constraint step often fails to raise system output. What should a manager do first?

Next unit: Business Models and Industry Logic →