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Strategic ManagementModule 1: Resource Based model and I/O model

Prof. Jay PadhM.H. Gardi School of Mgnt.

(M) 8866656695

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Resources

Resources are the inputs into a firmsproduction process: such as Physical Organizational Capital

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According to resource based model,

Differences in the firms performancesare due to their unique resourcesrather than their structuralcharacteristics.

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The I/O Model of Above AverageReturns

From 1960-80, it was believed that theexternal environment plays the vitalrole in determining the strategy

Thus, the Industrial Organization (I/O)model focuses on externalenvironments influence on a firms

strategic actions.

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According to this model, the industrythat a company chooses to competehas a strong influence on performance

rather than the operational issueshandled by the managers.

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Key factors to decide the firmsperformance as per I/O model

It is determined primarily by industryenvironment such as Economies of scale Barriers to market entry Diversification Product differentiation

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Assumptions

This model has assumed the followingfacts:

1. External environment imposespressures and constraints thatdetermine the strategies that wouldresult in above average returns

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Assumptions

2. Most firms of the industry havestrategically similar resources andadopt the similar strategies to use

the resources.3. Resources are highly mobile within

the industry.

4. The decision makers are rational andacts for the firms best interest.

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Thus, the I/O model challenges thefirms to locate the most attractiveindustry in which to compete.

Five forces model of competition is ananalytical tool used to help firms with

this task.

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Stake HoldersWhat Are the Stakeholders of a Business?

Any person or entity interested in a particular business is called a stakeholder.They are affected by the business activity,

and they may be part of the core decision- making team.Internal and external stakeholders may have different interests and priorities, possibly leading to conflicts of interest.

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Kinds of Stakeholders

Internal stakeholders are owners,managers, and workers.External stakeholders are the customersand the suppliers. The community inwhich the organization does businessalso is a stakeholder.

All the stakeholders are not equal, and

different stakeholders will have varyingconsiderations. These stakeholders canhave direct or indirect stake in theorganization and in policy-making.

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Influence of Stakeholders

Different stakeholders have differentinfluence.Owners have a major say in the way thecompany functions.Owners generally tend to extract themaximum efficiency and make themaximum profit from their investments in

the company. Customers are also keystakeholders in any organization. Theway they are catered to and their level of satisfaction determines how the

company runs.

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