Sounds like you may need to go back and re-visit those MBA classes! You say you heard something similar re: 'grow or die' (to take advantage of economies of scale/scope) and/or 'establish significant barriers of entry' (to reduce the effects of commodotozation) and that you... "disagreed with it then, and I do now." YET, you then go on to site two examples in Japan that highlight the values of barriers to entry. Specifically, for Nisiyama Onsen Keiunkan, the hotel highlights the fact that it sources all of its water from the hot springs and that it sits at the foothills of the south Japanese Alps (I think that is somehow insulting to Italians and Germans and their real Alps)... not to mention the 1,300 years of history for the hotel. These are its barriers to entry! Someone could open a Holiday Inn Express down the street, but they won't have the same value proposition because they don't have the same things to offer. And the point is, those things that Nisiyama Onsen Keiunkan offers are hard to replicate (hence the term barrier to entry) and that is what allows for it to maintain its value without the need to grow. Conversely, for hotel chains like Holiday In Express that offer nothing "unique"... the only way they survive with their commodity product is through sheer size, growth and scale.

Truly not trying to sounds snarky and completely d*ckish, but thanks for making my point!

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In search of the righteous life... we all fall down

The good ones teach you the why. :) The rule of thumb I learned in my MBA was that if you are managing a company and you can expect that you can grow faster than your weighted average cost of capital for any given investment, then you should invest it to grow. Otherwise you're supposed to give the money back to your shareholders in the form of dividends (or stock buybacks). The why behind this is that your investors themselves can be expected to invest this money on their own behalf (and do so in a diversified way). If you're making them less money than they could otherwise do themselves (for any given risk profile), then your fiduciary duty to your stakeholders is to give it back to them.

The problem is that most executives don't want to admit that they've run out of options and so adopt the "grow or die" mantra that we see. Ditto for acquisitions.

WACC= ((e/d+e) * i^e) + ((d/d+e) * i^d *(1-t))

And ..... yep. Perfectly explained.