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I/O Model Focus
Strengths
Weaknesses
Organizational
analysis
Opportunities
Threats
Environmental
analysis
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I/O Model: Above-Average Returns
Strategy dictated bythe externalenvironment of thefirm (whatopportunities exist inthese environments?)
Firm develops internalskills required by
external environment(what can the firm doabout theopportunities?)
External Environments
GeneralEnvironment
Outside-in
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The I/O Model of
Above-Average Returns
The External
Environment
1. Study the externalenvironment, especiallythe industry
environment.
The general environmentThe industry environmentThe competitor
environment
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An Attractive
Industry2. Locate an attractive
industry with a highpotential for above-
average returns.
An industry whosestructural characteristicssuggest above-averagereturns
The External
Environment
The I/O Model of
Above-Average Returns
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3. Identify the strategycalled for by theattractive industry to
earn above-averagereturns.
Selection of a strategylinked with above-average returns in aparticular industry
The External
Environment
An Attractive
Industry
StrategyFormulation
The I/O Model of
Above-Average Returns
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Assets and Skills
4. Develop or acquireassets and skillsneeded to implement
the strategy.
Assets and skillsrequired to implementa chosen strategy
The External
Environment
An Attractive
Industry
StrategyFormulation
The I/O Model of
Above-Average Returns
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Strategy
Implementation
Selection of strategicactions linked witheffectiveimplementation of thechosen strategy
The External
Environment
An Attractive
Industry
StrategyFormulation
Assets and Skills
5. Use the firms strengths(its developed oracquired assets and
skills) to implement thestrategy.
The I/O Model of
Above-Average Returns
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Superior Returns
The External
Environment
An Attractive
Industry
StrategyFormulation
Assets and Skills
Strategy
Implementation
Superior returns: Earningof above-average returns
The I/O Model of
Above-Average Returns
8/13/2019 IO & Resource Based Model - SM
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Resource-Based Model Focus
Strengths
Weaknesses
Organizational
analysis
Opportunities
Threats
Environmental
analysis
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Resource-Based Model Each organization is a collection of unique resources
and capabilities that provides the basis for itsstrategy
Capabilities evolve and must be manageddynamically (acquired and/or developed)
Differences in firms performances are due primarilyto their unique resources and capabilities ratherthan structural characteristics of the industry
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Resource-Based Model contdStrategy dictated by the firmsunique resources andcapabilities
Find an environment in which
to exploit these assets (whereare the best opportunities?)
Differences in firmsperformances are dueprimarily to their uniqueresources and capabilitiesrather than structuralcharacteristics of the industry
Firms Resources
THE FIRM
Inside-out
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Criteria for Resources and Capabilities
That Become Core Competencies
Core
Competencies
Valuable Rare
Costly to ImitateNonsubstitutable
Allow the firm to exploitopportunities or neutralizethreats in its externalenvironment
Possessed by few, if any,current and potentialcompetitors
When other firms cannot obtain them or mustobtain them at a much higher cost
The firm is organized to obtain the
full benefits of the resources
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Resources
1. Identify the firmsresources. Study itsstrengths and
weaknesses comparedwith those ofcompetitors.
Inputs into a firmsproduction process
The RBV Model of
Above-Average Returns
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Capability 2. Determine the firmscapabilities. What do thecapabilities allow the firm
to do better than itscompetitors.
Capacity of an integratedset of resources tointegratively perform atask or activity
Resources
The RBV Model of
Above-Average Returns
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3. Determine the potentialof the firms resourcesand capabilities in terms
of a competitiveadvantage.
Ability of a firm tooutperform its rivals
CompetitiveAdvantage
Capability
Resources
The RBV Model of
Above-Average Returns
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An Attractive
Industry
4. Locate an attractiveindustry.
An industry withopportunities that canbe exploited by thefirms resources andcapabilities
CompetitiveAdvantage
Capability
Resources
The RBV Model of
Above-Average Returns
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StrategyImplementation
Strategic actions takento earn above-averagereturns
An Attractive
Industry
CompetitiveAdvantage
Capability
Resources
5. Select a strategy thatbest allow the firm toutilize its resources and
capabilities relative toopportunities in theexternal environment.
The RBV Model of
Above-Average Returns
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Superior Returns
Superior returns: Earningof above-average returns
StrategyImplementation
An Attractive
Industry
CompetitiveAdvantage
Capability
Resources
The RBV Model of
Above-Average Returns
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Superior Returns
Strategy
Implementation
An Attractive
Industry
Competitive
Advantage
Capability
Resources
The RBV Model
Superior Returns
The External
Environment
An Attractive
Industry
Strategy
Formulation
Assets and Skills
Strategy
Implementation
The I/O Model
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SWOT Analysis
Strengths
Weaknesses
Organizational
analysis
Opportunities
Threats
Environmental
analysis
Framework: RBV Model Framework: I/O Model