IO & Resource Based Model - SM

I/O Model Focus
Organizational analysis Environmental analysis
Strengths
Opportunities
Weaknesses
Threats
I/O Model: Above-Average Returns

External Environments
General Environment
Strategy dictated by the external environment of the firm (what opportunities exist in these environments?) Firm develops internal skills required by external environment (what can the firm do about the opportunities?) Outside-in
The External Environment
The I/O Model of Above-Average Returns

1. Study the external environment, especially the industry environment.
The general environment The industry environment The competitor environment
The External Environment An Attractive Industry

2. Locate an attractive industry with a high potential for aboveaverage returns.
An industry whose structural characteristics suggest above-average returns
The External Environment An Attractive Industry Strategy Formulation

3. Identify the strategy called for by the attractive industry to earn above-average returns.
Selection of a strategy linked with aboveaverage returns in a particular industry
The External Environment An Attractive Industry Strategy Formulation Assets and Skills

4. Develop or acquire assets and skills needed to implement the strategy. Assets and skills required to implement a chosen strategy
The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation

5. Use the firms strengths (its developed or acquired assets and skills) to implement the strategy. Selection of strategic actions linked with effective implementation of the chosen strategy
The External Environment An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns
Superior returns: Earning of above-average returns
Resource-Based Model Focus

Organizational analysis Environmental analysis
Strengths
Opportunities
Weaknesses
Threats
Resource-Based Model
Each organization is a collection of unique resources and capabilities that provides the basis for its strategy
Capabilities evolve and must be managed dynamically (acquired and/or developed)

Differences in firms performances are due primarily to their unique resources and capabilities rather than structural characteristics of the industry
Resource-Based Model contd

Firms Resources Strategy dictated by the firms unique resources and capabilities
Find an environment in which to exploit these assets (where are the best opportunities?)
Differences in firms performances are due primarily to their unique resources and capabilities rather than structural characteristics of the industry
THE FIRM
Inside-out
Criteria for Resources and Capabilities That Become Core Competencies

Valuable
Allow the firm to exploit opportunities or neutralize threats in its external environment
Rare
Possessed by few, if any, current and potential competitors
Core Competencies
Nonsubstitutable
The firm is organized to obtain the full benefits of the resources
Costly to Imitate
When other firms cannot obtain them or must obtain them at a much higher cost
Resources
The RBV Model of Above-Average Returns

1. Identify the firms resources. Study its strengths and weaknesses compared with those of competitors.
Inputs into a firms production process
Resources

2. Determine the firms capabilities. What do the capabilities allow the firm to do better than its competitors. Capacity of an integrated set of resources to integratively perform a task or activity
Capability
Resources

3. Determine the potential of the firms resources and capabilities in terms of a competitive advantage. Ability of a firm to outperform its rivals
Capability
Competitive Advantage
Resources

4. Locate an attractive industry. An industry with opportunities that can be exploited by the firms resources and capabilities
Capability
An Attractive Industry
Resources

5. Select a strategy that best allow the firm to utilize its resources and capabilities relative to opportunities in the external environment. Strategic actions taken to earn above-average returns
Capability
An Attractive Industry Strategy Implementation
Resources
Capability
An Attractive Industry Strategy Implementation Superior Returns Superior returns: Earning of above-average returns
The RBV Model

Resources
The I/O Model

The External Environment
An Attractive Industry Strategy Formulation Assets and Skills Strategy Implementation Superior Returns
Capability Competitive Advantage An Attractive Industry Strategy Implementation Superior Returns
SWOT Analysis
Framework: RBV Model Framework: I/O Model
Organizational analysis Strengths
Environmental analysis
Opportunities
Weaknesses
Threats

IO & Resource Based Model - SM

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I/O Model Focus

Organizational analysis Environmental analysis

I/O Model: Above-Average Returns

The External Environment

The I/O Model of Above-Average Returns

The External Environment An Attractive Industry

The I/O Model of Above-Average Returns

The External Environment An Attractive Industry Strategy Formulation

The I/O Model of Above-Average Returns

The I/O Model of Above-Average Returns

The I/O Model of Above-Average Returns

The I/O Model of Above-Average Returns

Superior returns: Earning of above-average returns

Resource-Based Model Focus

Capabilities evolve and must be managed dynamically (acquired and/or developed)

Resource-Based Model contd

Criteria for Resources and Capabilities That Become Core Competencies

The RBV Model of Above-Average Returns

The RBV Model of Above-Average Returns

The RBV Model of Above-Average Returns

The RBV Model of Above-Average Returns

The RBV Model of Above-Average Returns

The RBV Model of Above-Average Returns

The RBV Model

The I/O Model

Capability Competitive Advantage An Attractive Industry Strategy Implementation Superior Returns

Organizational analysis Strengths

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