Which firm will have a higher level of economic performance

Which firm will have a higher level of economic performance: a) a firm with valuable, rare, and costly-to-imitate resources and capabilities operating in a very attractive industry or b) a firm with valuable, rare, and costly-to-imitate resources and capabilities operating in a very unattractive industry? Assume both these firms are appropriately organized. Explain your answer.

Solution

Hi,

Thanks for the question.

Since both the companies are very much well organized, their economic performance will be dependent upon the competitive landscape. So the company in the attractive industry will have a stiffer competition and their market share will be shared among the competitors which will lead to the lesser overall value.

In the unattractive industry, the competition is very less. So if the company has a value to offer in that kind of space, they will be generating all the value for themselves and will have the better economic performance.