Discuss the Similarities and Differences Between the Resourced Based View of Strategy and the Industrial Organisation (I/O) Based View of Strategy
Discuss the similarities and differences between the resourced based view of strategy and the industrial organisation (I/O) based view of strategy
The similarities and differences between the two views of strategy, resource-based view (RBV) and industrial organization (I/O) view will be critically discussed. According to Hanson, et al. (2011), the RBV model specifies a firm’s strategy internally to earn above-average returns based on its unique resources and capabilities. Resources such as capital equipments, individuals’ skills, patents and finances are formed into a capability and is managed dynamically to achieve competitive advantages over its rivals. The I/O model specifies a firm’s strategy based on external environment with the characteristics of general, industry and competitor environments (Hanson, et al., 2011). This model allows the firms in an industry to compete on their performance regarding to the threat of new entrants, rivalry among competing firms threat of substitute products, bargaining power of suppliers and bargaining power of buyers. The RBV focuses on internal factors while the I/O model focuses on external factors to achieve above-average returns.
The resource-based model assures the firm to acquire various resources and utilize them to achieve unique capability. To gain potential advantages over the competitors, the firm needs to choose valuable, rare, costly to imitate and non-substitutable resources and capability (Broderick, Hooley & Moller, 1988). However, resources such as human skills and creativity can be imitated and substituted as time passes. Therefore, they must be integrated and managed with potential capability in order to create customer value which can maintain good customer relationships. On the other hand, the I/O model suggests the firm to produce the standard products and services at lower cost than the competitors or the differentiated ones for which the customers are willing to pay at a premium price (Hanson,
The similarities and differences between the two views of strategy, resource-based view (RBV) and industrial organization (I/O) view will be critically discussed. According to Hanson, et al. (2011), the RBV model specifies a firm’s strategy internally to earn above-average returns based on its unique resources and capabilities. Resources such as capital equipments, individuals’ skills, patents and finances are formed into a capability and is managed dynamically to achieve competitive advantages over its rivals. The I/O model specifies a firm’s strategy based on external environment with the characteristics of general, industry and competitor environments (Hanson, et al., 2011). This model allows the firms in an industry to compete on their performance regarding to the threat of new entrants, rivalry among competing firms threat of substitute products, bargaining power of suppliers and bargaining power of buyers. The RBV focuses on internal factors while the I/O model focuses on external factors to achieve above-average returns.
The resource-based model assures the firm to acquire various resources and utilize them to achieve unique capability. To gain potential advantages over the competitors, the firm needs to choose valuable, rare, costly to imitate and non-substitutable resources and capability (Broderick, Hooley & Moller, 1988). However, resources such as human skills and creativity can be imitated and substituted as time passes. Therefore, they must be integrated and managed with potential capability in order to create customer value which can maintain good customer relationships. On the other hand, the I/O model suggests the firm to produce the standard products and services at lower cost than the competitors or the differentiated ones for which the customers are willing to pay at a premium price (Hanson,