Compare Io Model and Rbv

Topics: Strategic management, Management, Michael Porter Pages: 6 (1981 words) Published: October 16, 2010
Table of Contents

1. Strengths and Weaknesses of I/O model and RBV… 3 2. COMMONNANDDIFFERINGTHEMES……………………………4 3. STRATEGY FOR 21ST CENTURY………………………………… 6 4. CONCLUSION…………………………….. ………………………… 7 REFERENCE LIST…………………………………………………… 8

1. Strengths and Weaknesses of I/O model and RBV

Strength of I/O model

The core of I/O model’s framework is based on the consuetude of industrial organization which is there are five force in all competitive industries. The five forces have great significance in both industry attractiveness and strategic planning. In addition, strategic group model provides a basic approach to evaluate the firm’s external competitive position and identify the firm’s weaknesses and strengths.

Weakness of I/O Model

First, the industrial organization research is framed by the public policy. It never considers the implications for business strategy. In addition, industrial organization is engaged in industries and supposes all the firms in the industries are essentially the same. Nevertheless, the strategic planning is interested in ways to create unique strategies. Finally, I/O assumes away conduct (strategy) as relevant to affecting performance while strategists have methods to alter industry structure to a way which is good for them.

Strength of RBV

Fahy (200) argued that the primary contribution of the RBV of the firm is a theory of competitive advantage. The RBV focus on the resources in the firms and explains how the resources link to the strategies which the firms pursue. RBV can be used to assess the competitive potential of the different strategic alternatives firms face. The resource based theory would encourage the firms to exploit unique resources when they are aware of the advantages bring by the rare, nonsubstitutable, valuable, costly to imitate resources controlled by them.

Weakness of RBV

Some reviews point out that VRIN (Value, Rare, In-imitable and Non-substitutable) is neither necessary nor sufficient for SCA. Many people believe that the definition of resource is tautological .The resource’s value is uncertain and vague for form a useful theory. And a cogent critique asserts the resource’s definition is unfeasible and overly inclusive.

2. Common and Differing themes
External & internal
Both of I/O model and RBV are the theory of strategic management, but I/O model focus on the external environment and RBV focus on the internal environment. The I/O model considers the external environment which includes general, industry and competitor environment to be the principal determinant for a firm to achieve success. However, the resource based theory regards the resources held by a company as the determinant for a firm to achieve success. Strategic group

The concept of strategic group is used in the I/O model. The strategic group are the firms clustered together within an industry and follow similar strategies. It is frequently thought to be opposite to the RBV of the firm. However, both RBV and strategic attempt to interpret diversity in industries. RBV uses a pre-strategy position and strategy group uses a post-strategy position. Competitive dynamics

Competitive dynamics is the array of actions and responses among the firms and their competitors in the same industry. it is a theme belong to I/O model. However, some people believe that entrepreneurship which is human resource of a firm have the ability to affect the competitive dynamics because they can perceive the asymmetric information in the dynamic world. Above-average return

The above-average return is the ultimate objective of firms which use either industrial organization model or resource-based theory in their strategy (eg.,...

References: 1. Michael E. Porter. (1983) Industrial Organization and the Evolution of Concepts for Strategic Planning: The New Learning, Managerial and Decision Economics, Vol. 4, No. 3, pp. 172-180
3. Michael E. Porter. (1981) The Contributions of Industrial Organization to Strategic Management, The Academy of Management Review, Vol. 6, No. 4 pg. 609-620
5. Liran Einav and Jonathan Levin. (2010) Empirical Industrial Organization: A Progress Report, Journal of Economic Perspectives—Volume 24, Number 2—Pages 145–162
7. Xavier Gilbert and Peter Lorange. (1994) National Approaches To Strategic Management - A Resource-based Perspective, International Business Review
10. TOKUDA Akio. (2005) The Critical Assessment of the Resource-Based View of Strategic Management:The Source of Heterogeneity of the Firm, RITSUMEIKAN INTERNATIONAL AFFAIRS Vol. No.3, pp.125-150
12. John Fahy. (2002), A resource-based analysis of sustainable competitive advantage in a global environmentInternational , International Business Review 11, pg57–78
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