Compare and contrast the IO Model of AboveAverage Returns wi

Compare and contrast the I/O Model of Above-Average Returns with the Resource-Based Model of Above-Average Returns. Understand the assumptions of each before answering the discussion question. Note: These models challenge the manager to seek out the greatest profit potential and then learn how to use their resources to implement value-creating strategies given the characteristics of the industry. But to use these strategies it is assumed that the decision makers (managers and leaders) are rational and committed to acting in the firm\'s best interests. •If you were the manager implementing these models how could you use them in the firm\'s best interests? Could managers use them \"against the firm\'s best interests\". If you saw these models being implemented in an unethical way, what would you do? •Finally, explain how these models affect the strategic management process of the firm.

Solution

The I/O Model focuses on opportunities and threats.

The strategy is dictated by the external environmental of the firm, in other words: what opportunities exist in these environments.

The firm develops internal skills required by the external environment, in other words: what can the firm do about the opportunities.

This approach is known “outside-in”

Steps for the I/O model of above- average returns

Study the eternal environmental, putting special emphasis on the industry environment.

Locate an attractive industry with a high potential for above average returns

Identify the strategy called for by the attractive industry to earn above average returns

Develop or acquire assets and skills needed to implement the strategy

Use the firm´s strengths to implement the strategy

Superior returns

Resource based model focuses on strengths and weaknesses of the organization

Each organization is a collection of unique resources and capabilities that provides the basis for its strategy.

Find an environmental in which to exploit these assets, in other words where are the best opportunities

Differences in firm´s performance are due primarily due to their unique resources and capabilities rather.

This approach is known as “inside-out”

Steps for the Resources based model:

Identify the firm´s resources. Study its strengths and weaknesses

Determine the firm´s capabilities

Determine the potential of the firm´s resources and capabilities in terms of competitive advantage

Locate an attractive industry

Select a strategy that best allow the firm to utilize its resources and capabilities

Superior returns

If you were the manager implementing these models how could you use them in the firm\'s best interests? By implementing step by step and with the help on senior management and the board of directors as a manager I would be able to use them in the firm´s best interests

Could managers use them \"against the firm\'s best interests\".

If the process is not being audited and the manager is choosing the incorrect strengths and weaknesses then yes it could be against the firm´s best interests but it would be difficult because there are many people involved on this process

If you saw these models being implemented in an unethical way, what would you do?

I would communicate it immediately to upper management or my immediate boss

Finally, explain how these models affect the strategic management process of the firm.

Depending which direction management wants to go they can use any of those approaches, for example if they want to look outside of the organization they would use the first one but if management believes there is great talent already within they would use the second approach.

The strategy would depend on the approach used