Io & resource based model
Jan 18, 2015
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I/O Model Focus
StrengthsStrengths
WeaknessesWeaknesses
OrganizationalOrganizationalanalysisanalysis
OpportunitiesOpportunities
ThreatsThreats
EnvironmentalEnvironmentalanalysisanalysis
I/O Model: Above-Average Returns
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?)
External EnvironmentsGeneral
Environment
““Outside-in”Outside-in”
The I/O Model ofAbove-Average Returns
The External Environment
1. Study the external environment, especially the industry environment.
The general environmentThe industry environmentThe competitor
environment
An Attractive Industry
2. Locate an attractive industry with a high potential for above-average returns.
An industry whose structural characteristics suggest above-average returns
The External Environment
The I/O Model ofAbove-Average Returns
3. Identify the strategy called for by the attractive industry to earn above-average returns.
Selection of a strategy linked with above-average returns in a particular industry
The External Environment
An Attractive Industry
Strategy Formulation
The I/O Model ofAbove-Average Returns
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
The I/O Model ofAbove-Average Returns
Strategy Implementation
Selection of strategic actions linked with effective implementation of the chosen strategy
The External Environment
An Attractive Industry
Strategy Formulation
Assets and Skills
5. Use the firm’s strengths (its developed or acquired assets and skills) to implement the strategy.
The I/O Model ofAbove-Average Returns
Superior Returns
The External Environment
An Attractive Industry
Strategy Formulation
Assets and Skills
Strategy Implementation
Superior returns: Earning Superior returns: Earning of above-average returnsof above-average returns
The I/O Model ofAbove-Average Returns
Resource-Based Model Focus
StrengthsStrengths
WeaknessesWeaknesses
OrganizationalOrganizationalanalysisanalysis
OpportunitiesOpportunities
ThreatsThreats
EnvironmentalEnvironmentalanalysisanalysis
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 – cont’d
Strategy dictated by the firm’s 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
Firm’s Resources
THE FIRM
““Inside-out”Inside-out”
Criteria for Resources and Capabilities That Become Core Competencies
Core Core CompetenciesCompetencies
Core Core CompetenciesCompetencies
ValuableValuableValuableValuable RareRareRareRare
Costly to ImitateCostly to ImitateCostly to ImitateCostly to ImitateNonsubstitutableNonsubstitutableNonsubstitutableNonsubstitutable
Allow the firm to exploit opportunities or neutralize threats in its external environment
Possessed by few, if any, current and potential competitors
When other firms cannot obtain them or must obtain them at a much higher cost
The firm is organized to obtain the full benefits of the resources
Resources
1. Identify the firm’s resources. Study its strengths and weaknesses compared with those of competitors.
Inputs into a firm’s production process
The RBV Model of Above-Average Returns
Capability 2. Determine the firm’s 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
Resources
The RBV Model of Above-Average Returns
3. Determine the potential of the firm’s resources and capabilities in terms of a competitive advantage.
Ability of a firm to outperform its rivals
Competitive Advantage
Capability
Resources
The RBV Model of Above-Average Returns
An Attractive Industry
4. Locate an attractive industry.
An industry with opportunities that can be exploited by the firm’s resources and capabilities
Competitive Advantage
Capability
Resources
The RBV Model of Above-Average Returns
Strategy Implementation
Strategic actions taken to earn above-average returns
An Attractive Industry
Competitive Advantage
Capability
Resources
5. Select a strategy that best allow the firm to utilize its resources and capabilities relative to opportunities in the external environment.
The RBV Model of Above-Average Returns
Superior Returns
Superior returns: Earning Superior returns: Earning of above-average returnsof above-average returns
Strategy Implementation
An Attractive Industry
Competitive Advantage
Capability
Resources
The RBV Model of Above-Average Returns
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
SWOT Analysis
StrengthsStrengths
WeaknessesWeaknesses
OrganizationalOrganizationalanalysisanalysis
OpportunitiesOpportunities
ThreatsThreats
EnvironmentalEnvironmentalanalysisanalysis
Framework: RBV Model Framework: I/O Model
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