Pratik PoudelResearch Associate at Nepal Water Conservation Foundation for Academic Research (NWCF)
You are watching: The industrial organization (i/o) model argues that
A strategy is the combination of actions to exploit core competencies through which a company creates its own competitive edge. Every firm has or must makea strategy. A strategy is the only way that gives a clear cut path for a company or firm to excel. Similarly a person should also have a strategy, isn’t it? How can somebody excel without strategy? But for strategy you need to have your core competencies first. What are your core competencies? For this you need to keep exploring yourself. Don’t be afraid from exploring yourself.Well, let’s focus on two particular theories to make strategies. The first theory is called the I/O Model or Industrial organization model. This model explains it is theexternal environment which you should take care of before you make your strategy. This model explains that the industry in which a firm chooses to compete has a stronger influence on the firm’s performance than do the choices managers make inside the organization. The I/O model has four assumptions. The first assumption is that it is the external environment that creates pressures and constraints for a firm to make its strategy. The second assumption is that the firms competing within a particular industry has similar resources under theircontrol. Therefore the firms under these industries are more or less equal. The third assumption is that the resources that are under their control are highly mobile. And the fourth assumption is that the organizational people are rational human beings. The resource based model on the other hand gives us a different aspect than theI/O model. The resource based model assumes that each organization is a collection of unique resource and capabilities that provides the basis for its strategy and that is the primary source of their return. According to this model, differences in firms’ performances across time are due primarily to their unique resources and capabilities rather than the industry’s structural characteristics. So, this model focuses on unique resources and capabilities. If you have those unique resources, then you can develop the capabilities to gain competitive advantage. So, which is the model that you should follow to make personal strategy? I think you need to have the amalgamation of both models to make strategies. First, as Ihave already stated earlier, don’t hesitate to explore various things. As an entrepreneur you should not stick your own personal tastes and preferences. Youshould try to explore the market (external environment) to determine your resources (develop unique resources) to gain competitive advantage. Every firm has its own uniqueness. But the uniqueness does not have any value unless that uniqueness leads you to competitive advantage. Therefore, explore your core competencies (Resource based model) and keep it updated with the external environment (I/O Model).
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I enjoyed reading the article and it made me stop and ask myself questions about my personal strategy. Also, the topic is relevant to my current coursework. Thank you for the insight and for sharing the information.