Auto Industry I/O Model
A firm’s implementation of its strategies is determined by its chosen industry’s properties. These include economics of scale, barriers to entry, product differentiation, diversification and the extent of competition in that industry. Along with these properties, the I/O Model for Above-Average Returns includes four underlying assumptions. The first is the pressure and constraints imposed by the external environment that decide what strategies are used to obtain above-average returns. The second is the resources used to aid in the implementation of this set of strategies are assumed to be mobile across the firm. Third, the firms competing within the industry control similar resources that are relevant. Lastly, the organizational decisions made are in the firm’s best interest by maximizing profits. Overall, Ford takes part in the industrial organization model for above average returns. Ford’s strategies are focused on their external environments. For example when the popularity of hybrids and more environment friendly vehicles rose, Ford responded with such cars are the Ford Fusion Hybrid. The external environment has a clear stronger force than the internal capabilities of the firm. Ford’s newer mission is to be “One Ford”, this emphasizes that the strategies are mobile across the firm and any temporary differences will be short lived. Ford and its competitors, have control over the same resources strategically. Dealerships don’t just build anywhere, they find an area where they can be seen, the return on investment is beneficial, and a delivery of product is done with ease. The same is true with their competitors. This would explain why auto dealers from different brands are concentrated in the same area like an auto mall. The goal of any management is to maximize shareholder value, and the leadership makes decisions based on this.
The Resource Model of Above-Average returns is opposite of the I/O Model in the primarily assumption that it is not the firm’s
The Resource Model of Above-Average returns is opposite of the I/O Model in the primarily assumption that it is not the firm’s